U.S. Senator Daniel K. Akaka (D-Hawaii) has introduced legislation, the Pension Benefit Guaranty Corporation Pilots Equitable Treatment Act, to ensure the fair treatment of commercial airline pilot retirees. The legislation will lower the age requirement that the Pension Benefit Guaranty Corporation (PBGC) requires for annuitants to receive the maximum pension benefits allowed to age 60 for pilots, who are mandated by the Federal Aviation Administration (FAA) to retire before age 65. Under current law, a retiree must be normal retirement age – age 65 – to receive the maximum monthly amount guaranteed by the PBGC.
The Pension Benefit Guaranty Corporation Pilots Equitable Treatment Act amends Title IV of the Employee Retirement Income Security Act of 1974 to require the Pension Benefit Guaranty Corporation to take into account the fact that the pilots are required to retire at the age of 60 when calculating pilot benefits.
"With the airline industry, including Hawaii's carriers, experiencing financial difficulties, we need to enact this legislation to assist pilots at companies that have been or will be unable to continue their defined benefit pension plans," Akaka said.
The Pension Benefit Guaranty Corporation was established to ensure that workers with defined benefit pension plans receive some portion of their retirement income in cases where the employer is unable to pay for all of the benefits owed. After the employer proves to the PBGC that the business is financially unable to support the plan, the PBGC takes over the plan as a trustee and ensures that the current and future retirees receive their pension benefits within the legal limits. Four of the ten largest claims in PBGC's history have come from airline pension plans. Although airline employees account for only two percent of participants historically covered by PBGC, they have constituted approximately 17 percent of claims. For example, Eastern Airlines, Pan American, Trans World Airlines, and US Airways have terminated their pension plans and their retirees rely on the PBGC for their basic pension benefits.
Pilots seeking to work beyond the FAA-mandated retirement age of 60 must request a waiver from the FAA. "It is my understanding that the FAA does not grant many of these waivers," Akaka noted. "Therefore, most of the pilots do not receive the maximum pension guarantee because they are forced to retire at age 60. The maximum guaranteed pension for age 65 retirees for plans that terminate in 2003 is $43,977.24. The maximum pension guarantee for a retiree at age 60 is $28,585.20. This significant reduction in benefits puts pilots in a difficult position. Their pensions have been reduced significantly and they are prohibited from reentering their profession because of the mandatory retirement age.
"I hope that no additional airlines will fail to meet their pension obligations; however, the pilots need this protection against the loss of their benefits during this time of economic difficulty for the airline industry."
