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%I \I Pension Benefit Guaranty Corporation et P6EC 1200 K Street. N.W., Washington. D.C. 20005-4026 Ul-- 

MAR 2 9 2003 

Re: Appeal No. Trans World Airlines, Inc. 

(TWA) Retirement Plan for Pilots (the Plan) 

The Appeals Board reviewed your appeal. of PBGC's August 30, 

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 

$782.98 per month starting on your Earliest Unreduced Retirement 

Date (December 1, 2012) payable as a Modified Cash Refund Life 

Annuity (MCRLA) .' PBGC noted that it offers other benefit forms 

from which you may choose. PBGC included a Benefit Statement, 

which shows information the former Plan administrator (TWA) used to 

calculate your Plan-defined benefit. It shows that if you choose 

to start receiving your benefit before December 1, 2012, the amount 

will be reduced to account for the longer period of payment. The 

Statement also shows that PBGC used TWA's benefit amount to 

calculate your PBGC benefit. 

Your appeal said that 

(1) at the time the Plan was frozen in 1993, you and other 

TWA pilots hired after 1977 as well as all former Ozark 

Airlines pilots had "less than ten years active service" 

as a TWA pilot, 

(2) you and the others "were improperly denied the 

opportunity to 'grow into' the A plan ten-year minimum 

benefit, " 

(3) you and others had a request pending with the Internal 

Revenue Service (IRS) for "a determination on this 

matter," which if favorable to you would result in a 

higher benefit for all of you, and 

(4) because the IRS ruling was still pending, your PBGC 

The MCRtA would provide a benefit for the rest of your life. Also, because 

the Plan's former sponsor made special contributions on your behalf, your 

beneficiary would receive a benefit if you die before you receive pension 

payments equal to the special contributions balance 
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y Benefit Determination could not really be the "final" 

benefit determination. 91 

Dl On February 11, 2003, you called us and said that you would 1 send us a supplemental appeal letter to which you would attach 

information regarding the Tax Reform Act of 1986 (TRA '86). You 

dl implied that because TRA '86 required the Plan to amend its 

10-year-cliff requirement to a vesting schedule at least as 

favorable as a 5-year-cliff effective January 1, 1989, you should 

'have become immediately vested in the Plan's 25% of earnings 

minimum benefit on that date. 

Discussion 

1. Background of the Plan 

The Plan was originally established in 1950. It was 

maintained pursuant to collective bargaining agreements between TWA 

and the representatives of its pilots, the Air Line Pilots 

Association (ALPA) . The Plan was restated effective January 1, 

1986 (the 1986 Plan) and again on January 8, 1993. It received 

favorable determination letters from the IRS dated March 20, 1989 

and March 17, 1995. TWA sponsored the Plan until January 8, 1993, 

when Pichin Corporation (Pichin), a Carl Icahn-controlled company, 

became the Plan's sponsor under a Comprehensive Settlement 

Agreement (CSA) . TWA administered the Plan's benefit payments 

until the Plan terminated on January 1, 2001. 

2. Retirement Benefits under the Plan 

Under the 1986 Plan, a participant's benefit was calculated 

under one of two formulas. The Plan's generally applicable formula 

provided a normal retirement benefit at normal retirement age 

(age 60) equal to 1.5 percent of career earnings after 1970. plus 

the monthly benefit to which the pilot was entitled under the 

Plan's prior benefit formula. Participants became 100 percent 

vested in their benefit at age 45. Before age 45, participants 

became 50 percent vested after five years of service, earning 10 

percent per year thereafter until reaching 100 percent after ten 

years. 

The 1986 Plan also provided an alternate formula that afforded 

a minimum retirement benefit. If the minimum retirement benefit 

were greater than the benefit computed under career average 

The plan formyla provided a monthly benefit equal to 1/32 of aggregate 

contributions after October 1, 1970. Because TWA made contributions at the rate 

of 4 percent of compensation, the result was a formula equal to 1.5 (1/32 x 4% 

x 12)percent of career earnings. 
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?I formula, a participant would receive the minimum retirement 'I benefit. The minimum retirement benefit was equal to 25 percent of !I the participant's average monthly earnings (AME)', plus the benefit 

?' accrued before December 31, 1982. 

4 f! The eligibility requirements for the minimum retirement 

:I benefit differed depending on whether the participant had been a 

pilot for Ozark Airlines. To earn the minimum retirement benefit 

as a former Ozark pilot, the pilot needed ten years of continuous 

service as a TWA pilot before normal retirement age. Conversely, 

a TWA pilot needed ten or more years of continuous service or, 

alternatively, simply to reach normal retirement age after 

October 1, 1981. 

As part of the 1993 CSA, Pichin adopted a formal amendment on 

January 8, 1993 with an effective date of January 1, 1990, 

regarding the l0-year minimum benefit. Under that amendment, the 

minimum benefit formula changed from 25% times AME for participants 

with 10 years of TWA active service to 2.5% times AME for each year 

of TWA active service for participants terminating employment on or 

after January 1, 1990. The amendment also changed the vesting 

schedule to the five-year-cliff-vesting schedule. Participants who 

terminated employment before January 1, 1990 had their benefits 

calculated under earlier Plan provisions. The amendment also 

provided a special early retirement adjustment factor table for 

persons with less than 10 years of accrual service. 

Also on January 8, 1993, Pichin amended the Plan to freeze the 

accrual of benefits. Thus, a participant's accrued benefit under 

the minimum benefit formula is based on the participant's years of 

active service as of January 8, 1993, and his AME as of that date. 

Service after January 8, 1993 (along with age) counted toward 

lessening the severity of the early retirement reduction factor on 

the minimum benefit. 

3. The Issue Pending with the IRS 

ALPA specifically raised the issue of whether the freeze 

amendment violated the anti-cutback rule in the context of 

negotiation of the 1993 Comprehensive Settlement Agreement (CSA). 

In accordance with the CSA, Pichin requested a determination letter 

from the Brooklyn District Director (BDD) on March 30, 1993. The 

BDD forwarded the request to the National Office, which issued a 

Tax Advice Memorandum (TAM) on September 9, 1994, finding that the 

\ participant's AME was defined as the average monthly earnings level 

determined for the calendar year of the participant's highest earnings level out 

of the last ten (10) calendar years of Earnings, but not to exceed maximum 

monthly earnings of $8,400. 
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Plan did not, by its tens, violate the anti-cutback rule in 

section 411(d) (6) of the Internal Revenue Code (IRC). Thus, under 

the terms of the CSA, TWA was authorized, if not required under 

ERISA, to administer the plan in ac-cordance with the January 8, 

1993 amendments. 

On April 22, 1999, ALPA requested reconsideration\of the 1994 

TAM. We understand that the request was forwarded to the National 

Office, but after learning that the Plan had been terminated, the 

National Office halted its actions concerning the request. 

4. The Tax Reform Act of 1986 (TRn '86) 

Although the Tax Reform Act of 1986 (TRA '86) amended ERISA, 

effective January 1, 1989, to require sponsors of certain taxqualified retirement plans to adopt more generous vesting 

schedules, the effective date for certain collectively-bargained 

plans was dependent upon the date of termination of the relevant 

collective-bargaining agreement between the plan sponsor and the 

bargaining representative of employees. For the Plan, the 

effective date of the amendments to the vesting requirements under 

ERISA was January 1, 1990, not January 1, 1989. Consequently, 

based on the TRA '86 amendments to ERISA, you became fully vested 

in your accrued benefit under the Plan in five, not ten years, 

effective January 1, 1990. 

Based on the amendment to the Plan fixing an accrual rate of 

2.5 percent per year for the minimum benefit, you accrued seven 

years of Continuous Service by the date when the accrual of 

benefits was frozen, January 8, 1993. As of January 8, 1993, you 

had accrued 70 percent of the total maximum minimum benefit (2.5 

percent x 7 years of Continuous Service = 17.5 percent of AME) 

because the total number of accrual years was limited to ten. You 

accrued no additional years of Continuous Service after January 8, 

1993, but under the Plan's five-year-cliff vesting schedule, you 

were fully vested in your accrued minimum benefit as of January 8, 

1993. 

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 

October 11, 2002 appeal. You may, if you wish, seek court review 

of this decision. 

.If you need additional information from PBGC, please call the 

Customer Service Center at 1-800-400-7242. 
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Sincerely, 

:I Michel Louis 

Appeals Board Member