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Tulsa Area American Airline Retirees Could See Their Pensions Cut

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After an airline takes off after bankruptcy, often retirement promises are left on the tarmac. After an airline takes off after bankruptcy, often retirement promises are left on the tarmac.
The Pension Benefit Guaranty Corporation or PBGC is not funded by taxpayers. The Pension Benefit Guaranty Corporation or PBGC is not funded by taxpayers.
TULSA, Oklahoma -

American Airlines retirees could lose a billion dollars in benefits if the struggling company decides to shed its pension plans.

AMR, the parent company of the airline, filed for bankruptcy protection earlier this week. Now.130, 000 retirees are worried about their financial future.

There's a federal agency designed to make sure retired workers don't lose everything they were promised, if their former companies go under. But this safety net... has holes.

After an airline takes off after bankruptcy, often retirement promises are left on the tarmac. A Tulsa American Airlines mechanic says it's happened before at United.

"Even the people who were already retired at united got their retirements cut way back," said American Airlines retiree David Wilhelm.

United terminated its defined benefit plan, but that doesn't mean those pensions disappeared.

A federal agency--the Pension Benefit Guaranty Corporation--stepped in to pick up the slack. The corporation was created to insure retirees wouldn't be left empty handed.

 PBGC pays out five to six billion every year for failed pension plans. And local union leaders say that's what would happen if American were to terminate its plan.

"The PBGC will guarantee that and the retirement benefits should not change," John Hewitt:

PBGC says 85 percent of retirees get what they were promised, but there are limits. Congress passed a law capping those pension payments at 54-thousand a year.

American's pension obligation is $18.5 billion. If the struggling airline ended its pension plans, PBGC could cover $17 billion, but retirees would lose about $1 billion in benefits.

The federal agency says it will try to work with American to preserve the pension plans.

The director says like they did with "some plans at Delta and Northwest Airlines, we will encourage American to fix its financial problems and still keep its pension plans."

The Pension Benefit Guaranty Corporation or PBGC is not funded by taxpayers. The agency operates on premiums paid by corporations offering pensions, assets from absorbed pension plans, and investment income.

But PBGC leaders did warn if American were to get rid of pensions, it would financially weaken the agency because it would be the largest on record.

11/30/2011 Related Story: Are American Airline Executives Cashing In, While Tulsa Area Workers Get Docked?

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