Pension Company Takes Over Benefit Plan for Delta Pilots

By Russell Grantham, The Atlanta Journal-Constitution

Jan. 6–The Pension Benefit Guaranty Corp. said Friday it has formally taken over the pilots’ pension plan at Delta Air Lines, and it expects to be responsible for paying out close to $1 billion in benefits not covered by the plan’s assets.

The move was approved by Delta’s bankruptcy judge and the PBGC last year. It represents the sixth-largest pension liability the PBGC has taken on in its 32-year history, the PBGC said. The quasi-federal agency said the Delta pilots’ plan is underfunded by about $3 billion, with $4.7 billion in obligations and $1.7 billion in assets.

But because the PBGC only guarantees workers’ pension incomes up to certain limits, the agency estimated that it will be liable for about $920 million.

Under the termination, the PBGC’s maximum guarantee for pilots who retired at age 60 — the working age limit for airline pilots — is $30,978 a year. That’s far lower than what most retired Delta pilots were receiving before Delta filed for bankruptcy protection in 2005.

Last year, thousands of retired Delta pilots’ monthly checks shrank or were wiped out entirely in anticipation of the PBGC’s takeover, which took effect retroactively after termination was approved. But under recent contracts, retired pilots had been able to get half their pension benefits as a lump sum — often topping $1 million — when they left the airline.

One retired pilot group settled pension-related claims against Delta for about $800 million in unsecured claims. While those claims are typically worth less than their face value, the settlement will likely yield about $100,000 in additional compensation to individual retirees, softening the blow of termination.

The PBGC said it will notify retired and active Delta pilots in coming weeks and will later review records and benefits calculations.

Delta moved to terminate the pilot plan as a cost-saving move, and it has switched current pilots to cheaper, 401(k)-style retirement plans.

Delta’s larger pension plan for nonpilot workers remains in place, and the airline has said it hopes to keep it after being given extra time to bring it up to full funding.

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