The PBGC on Wednesday said it undervalued United Airlines' pension assets by 0.75%, or $58 million.
Officials at the Pension Benefit Guaranty Corp. in September will start sending back payments with interest to retirees, along with benefit increases. The undervalued amount was roughly $58 million out of $7.3 billion in total pension assets. The plans were terminated in 2004 and 2005 and are being operated by the PBGC.
According to a statement from the PBGC, 82% of United retirees' benefits are unaffected by the valuation change.
The reassessment was prompted by an inquiry from Rep. George Miller, D-Calif., to the agency's inspector general, Rebecca Anne Batts, who found the PBGC's handling of the valuation contractor “to be seriously deficient.”
KPMG was hired to redo the valuation, which took about 18 months.
“Unfortunately, PBGC let the people of United Airlines down, but we're determined to put things right,” PBGC Director Joshua Gotbaum said in a statement. “Anyone we've underpaid, by even a dime, is getting paid back with interest and an apology. And we're making other changes, so this doesn't ever happen again.”
PBGC is now paying benefits for 46,000 retirees in the four United Airlines defined benefit plans it oversees. About 8,000 of those retirees were positively affected by the revised valuation, which allowed the agency to augment a benefit cap that had the most impact on higher-paid pilots, PBGC spokesman Marc Hopkins said in an interview.
Mr. Hopkins said the agency is continuing to revisit other valuations included in a November 2011 inspector general's report that criticized the PBGC for its asset valuation process and oversight, and will next issue a revised valuation for the pension plans of National Steel Corp., Mishawaka, Ind., which the PBGC took over in 2003. At the time, seven plans had $1.3 billion in assets and $2.8 billion in liabilities, of which PBGC assumed responsibility for $1.1 billion.
The agency has also begun revamping its valuation department and is hiring asset evaluation specialists.
