MAY % 4 2003 

Pension Benefit Guaranty Corporation p3g 1200 K Street. N.W.. Washington, D.C. 200054026 

Re: Appeal 1 Case 194024, Trans World Airlines, Inc. 

(TWA) Retirement Plan for Pilots (the Plan) 

The Appeals Board reviewed your appeal of PBGC's December 31, 2 . 2002 determination of your PBGC benefit. For the reasons stated 

below, the Appeals Board granted your appeal in part by increasing 

your monthly PBGC benefit payable as a Joint and 50% Survivor 

Annuity with a Modified Cash Refund (MCRJ&SO%SA)' from $1,611.60 to 

$1,631.94. 

Determination and Amed 

PBGC determined that you were entitled to a PBGC benefit of 

$1,611.60 per month payable as an MCRJ&SO%SA. PBGC noted that that 

amount is less than you have been receiving. 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 April 9, 2003 appeal said that you feel that the final 

amount should be $1,827.16 per month. You explained how you 

believe PBGC should adjust your benefit to reflect the reduction in 

your benefit due to your Qualified Domestic Relations Order (QDRO) 

and the application of the maximum guaranteed benefit limit. Our. 

Discussion below addresses this issue, and explains how PBGC 

calculated your benefit. 

1. - Background 

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

1 Your MCRJh508SA 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. 
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 

TWAvs pension database, PBGC auditors concluded that the benefit 

amounts in WA's database were reliable. So, for most retirees, 

and in your case in particular, PBGC accepted TWA's accrued benefit 

calculations. 

In your case, PBGC also accepted TWA1s calculations of the 

benefits payable under your QDRO. PBGC then adjusted your benefit 

and the alternate payee's benefit to account for limitations on 

benefits set by Congress under the Employee Retirement Income 

Security Act of 1974, amended (ERISA). 

2. TWA's calculations 

TWA calculated the benefit payable to the alte&ate payee 

under the QDRO as follows: 

Your appeal questioned the amount of the reduction in the late 

1 

, 

5 

TWA calculated your final benefit under the QDRO as follows: 

Step in calculation 

Benefit payable at normal retirement date 

Increase for delayed payment of benefit fmm May 1, 1995 to 

September 1.1995 

Adjustment to reflect value of lump sum death benefit from May 1, 

1995 to September 1,1995 

Total Plan-provided MCR benefit at September 1. 1995 = (Line 1 x 

Line 2) minus Line 3 

Former spouse's share of Plan-provided benefit = 50% x Line 4 

Amount 

$3.170.16 

1.0277 

$6.22 

$3,251.75 

51,625.88 
.. retirement actuarial increase to provide for the survivor benefit 

from your normal retirement date to your actual retirement date. 

I 

B *, 

UI Your appeal suggested that the final reduction amount should be 

m between the adjustment amounts calculated by TWA when TWA estimated 

w 

z your benefits payable if you retired on either your 63rd or your 

64th birthday. The insurance charges that TwA estimated for 

retirement at age 63 and at age 64 were $42.21 and $62.20 , I 

respectively. 

The Appeals Board noted that although your Actual Retirement 

Date was November 1, 1998 and you elected the Joint and Survivor 

form of benefit, your benefit was paid in.the form of a Single Life 

benefit due to the operation of Plan section 9.3(A) (I), which 

provides as follows: 

8.3 Automatic Qualified Joint and Survivor Annuity. 

(A)(1) Subject to the provisions of subsection (B), in the case of any manied 

Member retiring at an early. normal or deferred retirement date, or a disability 

retirement date, the retirement benefit payment shall be a Qualified Joint and 

Survivor Annuity which shall be the Actuarial Equivalent of a single life 

annuity benefit otherwise payable under Section 9.2, if. at the time of 

commencement of such benefits. the Member is married for one year. If he 

has been manied for less than one full year at the date benefits commence, 

the Qualied Joint and Survivor Annuity option will become effective only 

after the Member has been married for one year. However, should the 

Member die due to accidental cause afler the commencement of benefb. 

the Qualified Joint and Su~ivor Annuilv o~tion will become effective on the 

date of his death." (Underlining added.) 

Based on the underlined portion of section 9.3 above, it 

appears that TWA decided that it should subtract an insurance 

charge for the accidental death-benefit coverage during your first 

year of retirement because your spouse would have received a 

survivor benefit if you had died due to an accidental cause between 

November 1, 1998 and November 1, 1999. 

After reviewing Plan practice with respect to other Plan 

participants, the Appeals Board noted that TWA charged for deathbenefit insurance only after a participant's normal retirement date 

and before the participant's actual retirement, the latter being 

the date on which the late retirement actuarial increase is 

determined. The Board concluded that TWA erroneously charged you 

for death-benefit insurance after November 1, 1998. 

An appeals actuary used TWA's standard insurance charge 

calculation procedure and recalculated your death benefit insurance 

cost as of your November 1, 1998 retirement date. The result of 

that recalculation is an insurance cost of $55.71. Based on this 
.. insurance cost, the Appeals Board recalculated your benefit payable 

ti under the QDRO using the procedure shown on page 2 of this decision .. 

U( and changed your benefit payable under the QDRO from $1,998.05 to 

a $2,006.18. D' 

x 

3. PBOC's calculations 

a. The Amount of Your PBGC Benefit If There Were No QDRO 

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: 

your guaranteed benefit, 

your ERISA § 4044 benefit, and 

your ERISA § 4022 (c) benefit. 

PBGC determined that if there were no QDRO, your full PBGC benefit 

payable as a Joint & 50% Survivor Annuity with a Modified Cash 

Refund (MCRJ&50%SA) would have been $3,060.17. 

In reviewing PBGC's calculation, however, the Board discovered 

that PBGC used an overstated post-age-65 insurance cost in 

calculating your §§ 4044 and 4022(c) benefits. Enclosure 1 shows 

the Appeals Board's recalculation of the monthly amount of your 

PBGC benefit if there had been no QDRO. Enclosure 1 concludes that 

if there were no QDRO, your monthly PBGC benefit would be $3,062.35 

payable as an MCRJ&SO%SA. 

b. The Amount of Your PBGC Benefit Payable under the QDRO 

Since your former spouse is receiving part of your benefit, 

PBGC must divide che PBGC benefit otherwise payable between the 

benefit you will receive and the benefit your former spouse will 

receive. The method PBGC uses for plans and QDROs like yours is to 

detenine the percentage of the full Plan benefit that PBGC would 

provide in the absence of a QDRO and pay you that percentage of 

your final Plan benefit under the QDRO. 

PBGC's Benefit Statement showed that your monthly Plan 

benefit, if there were no QDRO, would be $3,793.97 ($4,574.91 x 

0.8293). However, this benefit amount is based on a post-age-60 

death-benefit insurance cost of only $65.51. If there had been no 

QDRO, on the other hand, the cost of post-age-60 death-benefit 

coverage would have been greater because no portion of the special 

employer contributions would have been assigned to -your former 
.# 

.. spouse's benefit. 

5 

.. 

w An appeals actuary used TWA's standard insurance charge 01 calculation procedure and recalculated your death benefit insurance . 

g cost as of your November 1, 1998 retirement date based on your full . contribution balance if no portion had been assigned to the 

alternate payee under the QDRO. The result of that recalculation 

is an insurance cost of $100.90. Based on this insurance cost, the 

Appeals Board changed PBGC's calculation of your Plan benefit (if 

there were no QDRO) from $3,793.97 to $3,764.62. 

So, if there were no QDRO, PBGC would pay you 81.3455% 

($3,062.35 divided by $3.764.62) of your Plan benefit.' Thus, PBGC 

shall pay you 81.3455% of your Plan benefit under the QDRO. As a 

result, your final monthly PBGC benefit payable as an MCRJ&50%SA is 

$1,631.94 (81.3455% times $2,006.18). 

4. Your Calculation 

Your appeal disagrees with PBGC increasing your full plan 

benefit (that is, before the offset for the QDRO. awarded to your 

previous wife, ) for late retirement before 

limiting the benefit to the maximum benefit that PBGC can 

guarantee. Your appeal, in effect, suggested a different way of 

"splitting" your PBGC benefit between you and your former spouse. 

Please note that section 3 of PBGC's QDRO policy states: 

"a. Adjustments to Estimated and Termination Benefit Levels 

If the order specifies how PBGC benefit adjustments are to be allocated between the 

participant and alternate payee, PBGC will fonow the order. but only to the extent it 

allows PBGC to make the required benefit adjustments. If an order provides no 

guidance, PBGC will adjust benefits as follows: 

(1) If the QDRO awards a specified percentage of the participant's benefit 

amount or value to the abmate payee, PBGC will proportionally adjust the 

benefits payable to both the participant and the alternate payee to reflect 

PBGC's adjustments to the participant's total benefit. 

Your QDRO is silent regarding how your PBGC benefit is to be 

split between you and your former spouse. Therefore, the Appeals 

Board found that PBGC properly followed established PBGC procedures 

and policy in adjusting the benefits payable to you and the 

alternate payee. 

Please note that the Appeals Board has no authority to change 

PBGC policy. 
Decision 

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

case, the Appeals Board decided to grant your appeal in part by 

increasing your monthly PBGC benefit,payable as an MCRJ&50%Sa from 

$1,611.60 to $1,631.94. I 

This is the agency's final decision regarding the issues you 

raised in your appeal. You may, if you wish, seek court review of 

this decision. 

If you need more information about your benefit, please call 

the Customer Contact Center at 1-800-400-7242. 

Sincerely, 

Michel Louis 

Appeals Board Member 

Enclosures (2)