ATLANTA — The government’s pension insurer said today it has formally become trustee of Delta Air Lines’ pilots pension plan.
The announcement followed a bankruptcy court judge’s approval of Delta’s request to terminate its pilots pension plan and the judge’s approval of an agreement to compensate the Pension Benefit Guaranty Corp. (PBGC) for taking on the pension obligations.
The PBGC will pay Delta pilots who retire a benefit up to a maximum limit, which in many cases will be less than what the pilots were entitled to under the pension program at Delta. Separate agreements the airline reached with the pilots were meant to help them recoup some of the lost pension benefits.
Atlanta-based Delta, the nation’s No. 3 carrier, has said it needed to terminate the pilots pension to successfully emerge from bankruptcy, which it expects to do by the middle of this year. Delta has said it intends to maintain its pension covering non-pilots, thanks to relief it received from Congress.
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The PBGC will be responsible for paying pension benefits to more than 13,000 active and retired Delta pilots.
The pilots pension plan is underfunded by about $3 billion, with $1.7 billion in assets to cover more than $4.7 billion in benefit liabilities, the PBGC said.
Of the $3 billion in underfunding, the PBGC estimates that it will be liable for almost $920 million, making the Delta pilots plan the sixth-largest claim in the agency’s 32-year history. The termination of the plan was effective retroactive to Sept. 2, 2006.
Under federal pension law, the maximum guaranteed pension at age 65 for participants in plans that terminate in 2006 is $47,659.08 a year. At age 60, the maximum is $30,978.36. If the plan has sufficient assets, however, participants who are already retired or near retirement can receive more than the guaranteed amounts under certain rules, the PBGC said.