Feds outline impact of ending pension plans

AP News
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Posted: Mar 07, 2012 5:28 PM
Feds outline impact of ending pension plans

When companies terminate traditional pension plans, it can result in lower retirement benefits for workers.

That's because the U.S. Pension Benefit Guaranty Corp., or PBGC, sets limits on the benefits it will provide when it takes over a terminated plan. The top limit is $54,000 a year, but it's much lower for some workers, depending on their age at retirement.

American Airlines said Wednesday that it would freeze its pension plans for most workers _ reversing an earlier decision to terminate the plans _ but still might kill pilots' pensions.

The pension agency gave examples of how workers would be affected if American terminated their plan:

_ A 52-year-old pilot with 25 years of experience and a salary of $155,000 would get a pension of $46,500 per year if he retires at 60. But if American terminates the pension plan, the PBGC would pay only $35,100, a loss of 25 percent.

_ A ground worker earning $50,000 a year with nearly 15 years at the company would get at least $12,400 per year at 60 or 65 under the company plan, but only $11,600 from the PBGC.

_ A flight attendant making $31,000 with nearly 15 years of service would get $7,700 at 60 or 65 under the company pension plan, but $7,200 at age 65 or just $4,464 at 60 if the plan is terminated.