, . Pension Benefit Guaranty Corporation 

1200 K Street, N.W., Washington, D.C. 20005-4026 

NO'J r ,3 g 

- NOV 1.3 m 

Re: Appeal No. 1 Trans World Airlines, Inc. (TWA) 

Retirement Plan for Pilots (the Plan) 

The Appeals'Board reviewed your appeal of PBGC's September 13, 

2002 determination of your PBGC benefit. For the reasons stated 

below, we must deny your appeal. 

Determination and Appeal 

PBGC determined that you are entitled to a PBGC benefit of 

$2,533.45 per month payable as a Joint and 50% Survivor Annuity 

with a Modified Cash Refund (MCRJ&SO%SA).l PBGC included a Benefit 

Statement, which shows information the former Plan administrator 

(TWA) used to calculate your Plan benefit. The Statement also 

shows that PBGC used TWA's Plan benefit amount to calculate your 

PBGC benefit. 

Your October 15, 2002 form-letter appeal said that (1) PBGC 

did not provide you with sufficient information on the analysis 

that underlies the determination, and (2) without such information, 

it is difficult for you to know whether errors not apparent to you 

were made: Our Discussion below addresses those issues, and the 

other issues you raised. 

Discussion 

1. Request for Additional Information 

Because your appeal requested more information about your 

benefit calculation, the Appeals Board sent your request to PBGC's 

Disclosure Officer and informed you in a letter dated November 29, 

2002 that you had the option of supplementing your appeal within 30 

1 Your MCRJ&SO%SA provides a benefit for the rest of your life, and if you 

die first, your spouse will receive one-half of your benefit amount for the rest 

of her life. Also, because the Plan's former sponsor made special contributions 

on your behalf, your beneficiary will receive a benefit if you and your spouse 

die before you receive pension payments equal to the special contributions 

balance. 
days after his response. PBGC records show that the isc closure 

Officer responded to your request on December 4, 2002 with copies 

of the documents in your personal PBGC- file. One of those 

documents shows how TWA arrived at your Plan-defined benefit of 

$2,533.45. See Enclosure 1. We received your December 28, 2002 

letter in which you challenged the sufficiency of the Disclosure 

Officer's response under the Freedom of Information Act (FOIA). We 

forwarded your request for additional documents under FOIA to 

PBGC's Office of the General Counsel. 

2. Cost of Insurance for Late Retirement 

You questioned the cost of insurance for late retirement used 

in your benefit calculation. You said that (a) this charge was not 

justified because it was applied two years after your benefit 

rights vested on January 2, 2001, and you did not have any 

information on any insurance charges when you applied for 

retirement; (b) your wife did not sign the Revocation of Waiver 

that you signed on February 23,.1998, and you were not aware of any 

insurance charge that was applicable to the Joint and 50% Survivor 

Annuity; and (c) you should not be penalized for working past age 

60. 

(a) INFORMATION ABOUT THE INSURANCE CHARGE WHEN YOU STARTED RECEIVING YOUR 

BENEFIT. When PBGC takes over a plan, PBGC continues to pay 

retirees in pay status at an estimated guaranteed benefit level to 

prevent hardship to plan participants. In your case, although you 

applied for retirement effective April 1, 2001, PBGC started paying 

you an estimated benefit retroactively to the Plan's termination 

date (January 1, 2001) because your monthly benefit amount was 

frozen on that date. PBGC started to pay you the $2,512.50 

estimated benefit, with the understanding .that once all the 

participant and Plan information was audited, PEW would inform you 

of your final PBGC benefit amount. Please note that when PBGC 

calculated your final benefit, the amount of the charge was 

calculated as of January 1, 2001. 

(b) YOUR WAIVER OF COVERAGE, YOUR REVOCATION OF THAT WAIVER, AND NOTICE 

OF AeeLIcABnIn OF m~ CHRRGE TO YOUR BRJEFIT AmxMT. Enclosure 2 is a copy 

of the waiver that' you and your spouse signed in 1986. Your 

spouse's signature was required on the waiver form because by 

signing it, she gave up her right to a survivor benefit in the 

event that you died before starting to receive your pension 

benefit. Enclosure 3 is a copy of Revocation of Waiver form that 

you signed in 1998. That form did not require your spouse's 

signature because, by signing the form, you were electing to give 

her back her right to receive a benefit if you died before 

retirement. The right that you restored to her was an insurance 

right, with its accompanying cost. In fact, the Revocation of 
i? Waiver form explicitly states: 

12) my retirement plan benefit, or in the event of my death before retirement, the 

retirement plan benefit received by my spouse. will be redused by any applicable 

protection charge over the period this pre-retirement coverage is in eLfect. 

I Thus, the insurance cost is applicable to your benefit in 

P whatever form your benefit is paid and'is not related to your 

selection of a benefit that provides a survivor benefit. Because 

the Plan and your Revocation of Waiver require a reduction for this 

protection insurance, the Employee Retirement Income Security Act 

of 1974, as amended (ERISA) does not allow PBGC to calculate your 

benefit without applying the charge. 

(c) "P~ALTY" FOR WORKING PAST AGE 60. Because you quit working 

for TWA after age 60, PBGC adjusted your benefit to reflect your 

delayed retirement in two steps, following TWA's established 

method. First, PBGC calculated a late retirement increase factor 

(1.3452) using standard actuarial formulas but under the assumption 

that no benefit would be payable either to your estate or your 

spouse if you died while actively employed. Second, TWA calculated 

the value of the benefit that would be paid in the event you died 

while actively employed, and calculated the annuitized insurance 

cost ($74.12 per month) of providing that death-benefit coverage 

while you were actively employed. 

As a result of the two calculations described above, your 

accrued benefit payable at age 60 was increased for your delayed 

retirement by a total of $932.06 (34.52% times $2,914.77 minus 

$74.12). Given that your accrued benefit was increased by $932.06 

to reflect your delayed retirement, the Appeals Board found that 

you were not "penalized" for working past age 60. 

2. Calculation of Your Plan-Defined Benefit and Your PBGC Benefit 

After the Plan terminated on January 1, 2001, PBGC personnel 

conducted an audit of the procedures TWA used in administering the 

Plan and calculating participants' Plan-defined benefits. After 

calculating benefits for a sampling of participants and comparing 

the results with the amounts that TWA calculated and stored in 

TWA's pension database, PBGC auditors concluded that the benefit 

amounts in TWA's database were reliable. So, in most cases and in 

your case in particular, PBGC accepted TWA's calculations, and then 

adjusted them to account for limitations on benefits set by 

Congress under ERISA. 

Documents in PBGC files reveal that the Plan did not have 

sufficient assets when it terminated on January 1, 2001 to provide 

all'benefits that PBGC guarantees under ERISA. AS a result, the 

provisions of the Plan, ERISA, and PBGC's regulations and policies 
determine the amount of: 

9 your quaranteed benefit. . 

h your ERISA 5 4044 bene'fit, and 

3 your ERISA 5 4022 (c) benefit. 

Enclosure 4 shows how PBGC calculated these benefit amounts. 

3. Federal Litigation 

Your form-letter appeal inciudes claims that are being 

litigated against PBGC and other parties in two federal courts. 

The plaintiffs in the court cases allege among other things that 

the Plan was improperly terminated under ERISA. The form letter 

says that you are raising these issues in order "to ensure that all 

my rights with respect to the issues in contention in those 

litigations are fully preserved." 

By way of background, Carl Icahn was the former controlling 

shareholder of TWn. TWA filed a bankruptcy petition in 1992 in the 

Bankruptcy Division of United States District Court for the 

District of Delaware. One of the issues involved in the bankruptcy 

was the status of TWA's underfunded pension plans, and the extent 

of Carl Icahn's liability, if any, in the event the plans 

terminated. Among other things, Mr. Icahn conditioned his 

willingness to provide TWA with a $200 million loan (which was 

necessary for TWA to survive and emerge from bankruptcy) upon some 

provision that fixed the amount of liability that he might incur 

towards the pension plan. Throughout these proceedings, the 

interests of the retired and active pilots were represented by the 

Air Line Pilots Association (ALPA). 

On January 5, 1993, TWA, ALPA (and other unions that 

represented TWA employees), and PBGC signed a "Comprehensive 

Settlement Agreementn (CSA) under which: (1) Carl Icahn would loan 

TWA $200 million; (2) an Icahn-owned concern called Pichin took 

over sponsorship of the TWA Pension Plans, and agreed to become 

responsible for any minimum funding cost of the Plans that were not 

covered by a $300 million payment guaranteed by TWA; (3) it was 

agreed that the Plans would terminate if certain events occurred 

after 1993; and (4) if the Plans werf: thereafter te.rminated by 

PBGC. it was agreed that Icahn would pay PBGC $240 million dollars. 

The Bankruptcy Court approved the CSA, and it was later 

incorporated in a Plan of Reorganization approved by the Bankruptcy 

Court. Neither ALPA nor any other party took an appeal from that 

decision, which became final and binding. 

The TWA Pension Plans terminated in 2001. Even though ALPA 

was one of the parties that negotiated and signed the CSA, it filed 
i a suit to stop the termination and void the settlement agreement. 

Judge Ricardo Urbina of the United States District Court for the 

District of Columbia dismissed the case on March 29. 2002.l 

Following the merger of TWA and American Airlines, the Allied 

p Pilots Association assumed representation of former TWA pilots and 

G. appealed Judge Urbina's ruling to the,U.S. Court of Appeals for the 

D.C. Circuit. 

On July 11, 2003, the Court of Appeals issued its decision 

affirming Judge Urbina's decision. The Court of Appeals held that 

the termination was lawful under ERISA and that the CSA was a valid 

exercise of PBGC1s statutory settlement authority.> 

Between the: two decisions, on May 15, 2002, eight former TWA 

pilots filed another lawsuit challenging the termination, also in 

Washington, D.C.. The judge postponed litigation in the second case 

until the appeal of the first case was decided. On September 8, 

2003, the plaintiffs filed an amended complaint and a request for 

a writ of mandamus. PBGC's response is due in November 2003. 

While your appeal briefly summarizes the claims in these 

cases, it does not identify any errors in PBGC's determination of 

your PBGC benefit based on (1) your personal data, (2) the Plan's 

provisions, or (3) ERISA provisions, given the Plan's actual status 

as a terminated, PBGC-tyusteed plan. Please note that the Appeals 

Board does not have the authority to decide whether the Plan's 

termination was proper, or to change the termination date. In any 

event, the Board declines to decide the claims that are in 

litigation. 

Decision 

Having applied the law and PBGC's rules to the facts in this 

case, the Appeals Board decided that we must deny your appeal. 

This decision is the agency's final action regarding your appeal. 

You may, if you wish, seek court review of this decision. 

PLXASE NOTE that PBGC will always, even after an appeal is 

closed, consider any - new, specific evidence that you present 

showing you may be entitled to a higher benefit. If you have or 

obtain any such evidence, please send it to PBGC, Attn: Insurance 

Operations Department, Trusteeship Processing Division #1, 

P.O. Box 151750, Alexandria, Virginia 22315-1750. If you need more 

information about your benefit, please call the Customer Contact 

1 A wpy of Judge Urbina's decision (http://www.dcd.uscourts.gov/OO-3113.pdfl 

is available on the court's website (http://ww*.dcd.uscourts.gov/l. 

2 The Court of Appeals decision is available on the court's web site at 

(http://pacer.cadc.uscourts.gov/docs/common/opinions/200307/02-5144a.pdfl. 
8. 

Ib y Center at 1-800-400-7242. 

Michel Louis 

Appeals Board Member 

Enclosures (5)