Government Bails out Pan Am Pension Plans
WASHINGTON (AP) _ The government moved Wednesday to protect 35,000 Pan Am Corp. employees and retirees with a record bailout of company pension plans worth $840 million.
The Pension Benefit Guaranty Corp. asked a U.S. District Court in New York to terminate the two plans following a series of missed pension contributions by the airline.
The agency said its maximum guarantee, currently at $2,250 a month, will cover full retirement payments for most of the 11,000 Pan Am retirees involved. A small group of flight engineers, mostly younger retirees, may experience a reduction in benefits, the agency said.
Pan Am has a third pension plan for pilots, but the federal agency has not determined whether that plan's finances require a takeover.
The airline, which has filed for protection in bankruptcy court, is trying to sell off its assets. At least four rival carriers are bidding for pieces of Pan Am.
James B. Lockhart, executive director of the pension agency, said taking over the carrier's two underfunded plans "eliminates the uncertainty over the pension liability, thus clearing the way for sales of Pan Am assets."
Because the other airlines are only trying to buy part of Pan Am's assets, they would not be responsible for pension plan liabilities, Lockhart said.
Instead, the pension agency is seeking to recover claims in bankruptcy court to make up its huge loss on the carrier's pension plans, he said. The pension agency is the largest creditor in the case, he said, and is hopeful it will win the largest settlement from Pan Am's estate.
The pension insurance agency, financed by employer-paid premiums, expects to take a loss of more than $600 million _ the amount it guarantees _ before any recoveries, he said. …