PBGC Director Joshua Gotbaum on Thursday reminded House subcommittee members asking about American Airlines' plans to terminate its four defined benefit plans that Congress gave the airline $1 billion in pension funding relief several years ago.
Mr. Gotbaum's appearance before a House Subcommittee on Health, Employment, Labor and Pensions hearing had been scheduled before Wednesday's announcement by the airline of the plan terminations.
Mr. Gotbaum told the panel that he wants American Airlines to prove it needs to terminate its defined benefit plans before the agency inherits $9 billion in estimated pension liabilities, which would be the largest claim in the Pension Benefit Guaranty Corp.'s history.
“First, we have to see if they can keep their plans,” Mr. Gotbaum said in an interview after the hearing. “If they can't, then we have to be prepared to take them.”
That prospect has Mr. Gotbaum worried that the agency will run out of money, and it also concerns corporate pension plan executives who fear the PBGC's takeover of the airline's plans will boost the agency's argument to raise its overall premiums.
Rep. George Miller, D-Calif., urged the PBGC during the hearing to avoid the mistakes it made when it took over United Airlines' pension plans during its parent's 2005 Chapter 11 bankruptcy.
“I think the taxpayers got screwed and the workers got screwed,” Mr. Miller said.
Subcommittee Chairman Phil Roe, R-Tenn., said he was “deeply troubled” by American's decision to terminate its plans and supported PBGC's efforts to seek more information.
“The main thing is that the agency gets a good look to make sure the company can't keep its plans,” Mr. Roe said in an interview after the hearing. “There will be no more bailouts.”
