PBGC

Protecting America's Pensions 

Pension Benefit Guaranty Corporation 

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

January 10, 2012 

Re: Case 203572; Retirement Plan for Flight Attendants in 

the Service of US Airways, Inc. (the "FA Plan" or the "Plan") 

Dear 

This Appeals Board decision responds to your appeal of PBGC's December 10, 

2009 determination of your benefit under the FA Plan. As we explain below, the 

Appeals Board changed PBGC's determination by increasing your PBGC benefits. The 

following table summarizes the Board's changes: 

PBGC Benefit under PBGC Benefit 

Full Plan the 12/10/2009 Calculated by the 

Benefit Determination Letter Appeals Board 

Benefit Before Attainment of Age 62 $2,381.73 $2,181.08 $2,245.40 

Benefit After Attainment of Age 62 $1,155.63 $954.98 $1,155.63 ... Total Overpayment through 2/1/2012 N/A $17,055.25 $2,453.94 

Present Value ofTermination Benefit as '· 

of the Plan's Termination Date N/A $221,366 $230,229 . Recoupment Percentage (Based on 

3/1/2012 Target Adjustment Date) N/A 7.70% 1.07% 

Monthly Recoupment Reduction 

Amount N/A $73.53 $12.37 

Reduced Benefit Amount N/A $881.45 $1,143.26 

First Date of Reduced Benefit N/A 03/01/2012 03/01/2012 

Last Date of Reduced Benefit N/A 05/01/2031 08/01/2028 

Benefit Amount After Last Month of 

Reduced Benefit N/A $954.98 $1,155.63 
·• • ..:r 

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PBGC's Determination and Your Appeal 

PBGC's December 10, 2009 letter and accompanying Benefit Statement 

indicated that you were entitled to a PBGC benefit of $2,181.08 per month from 

February 1, 2005 until age 62 and $954.98 per month after age 62. The letter said that 

PBGC first determined the benefit to which you were entitled under the FA Plan, and 

then, applied the limits under the law. · The Benefit Statement said that the limitations 

under the law affecting your benefit were the Accrued-at-Normal and Phase-In limits. 

PBGC's determination letter also noted that your benefit is payable under the FA 

Plan's Level Income Option ("LIO"). It explained that, under the LIO, at age 62, your 

monthly benefit was reduced by an estimate of your Social Security benefit payable at 

that age 62. 

PBGC also determined that, as you received estimated monthly benefits larger 

than your PBGC benefit amount, PBGC had paid you $12,239.65 too much as of the 

Target Adjustment Date (March 1, 201 0). Thus, if the Board had not changed your 

PBGC benefit, your total overpayment would have risen to $17,055.25 as of the new 

Target Adjustment Date of March 1, 2012. The letter explained that PBGC would 

reduce your future monthly payments by a small percentage until the total overpayment 

is repaid, without interest. 

In your January 5, 2010 appeal letter, you said: 

When I was advised of my current benefit of $1155.63, I questioned why the 

amount was not a greater sum based upon my period of employment and pay 

scale. I was assured that the current amount was a minimum figure which very 

likely be adjusted upwards because I had chosen to not name my to 

receive any of my benefits at my death. . . . I was at any time told that the sum of 

$1155.63 was an "estimate" except to the extent the amount might be increasednot decreased in the future. PBGC's decision is both arbitrary and devastating. 

It appears that I am being now punished financially for PBGC's 

administrative error, an error which apparently took them nearly five years to 

discover. I would think that there are rules and regulations- including statutes of 

limitations -which would protect innocent persons such as myself who fall victim 

to this sort of administrative lack of competence. 

Discussion 

1. Background 

PBGC provides pension insurance in accordance with the Employee Retirement 

Income Security Act of 1974, as amended ("ERISA"). If a plan sponsor is unable to 

support its defined-benefit pension plan, PBGC becomes trustee of the plan and pays 

pension benefits as defined in the plan, subject to legal limitations and requirements set 

by Congress under ERISA. 
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Records available to the Appeals Board show that the FA Plan terminated on 

January 10, 2005 and PBGC became the FA Plan's trustee on February 1, 2005. 

When PBGC becomes trustee of a terminated plan, PBGC collects participant 

data and plan documents, and audits that data. The information comes from a variety 

of sources, such as the plan's former administrator, the plan's former actuary, and the 

plan's former paying agent. PBGC necessarily relies on the information it receives from 

these sources unless (1) PBGC's audit of that information shows that it is wrong, or 

(2) a participant supplies PBGC with documents showing that the information is wrong. 

Furthermore, if a plan's provisions are ambiguous, PBGC reviews "plan practice" to 

determine how the plan's former administrator interpreted the ambiguous provisions. 

PBGC usually accepts the former administrator's interpretation of ambiguous provisions 

if that interpretation is reasonable and if it is consistently applied to all participants. 

The records PBGC received from US Airways, Inc. ("US Airways") show that 

(1) you were born on 1944; (2) you were hired on 1970; (3) your 

employment status changed to LFV on I 12002 because you elected a 

voluntary furlough under the VF2 program; (3) you terminated your employment with US 

~ on 2004; (4) you elected to start receiving your benefit effective 

L______j2004; and (6) you were married when you started receiving your benefit. You 

did not disagree with any of this information in your appeal letter. 

Other records available to the Appeals Board indicate that your date of hire 

corres onds with our em lo ment commencement date as a Flight Attendant with 

~~--~~------~~~~--~ 

and that you were covered as a Flight Attendant 

under the Plan before the Plan merged into the FA Plan on 

2. Your Estimated PBGC Benefit 

When PBGC becomes trustee of a terminated plan, PBGC generally continues to 

pay retired participants the same benefit amounts they were receiving from the plan's 

former administrator on an estimated basis while PBGC begins its audit of the plan. 

Thus, while PBGC accepted the benefits calculated by US Airways for participants like 

you as the correct amount of the full Plan benefit, that full Plan benefit became the 

estimated PBGC benefit when the Plan terminated because ERISA's limitations on 

PBGC benefits go into effect when a plan terminates. 

Due to the length of time it generally takes PBGC to complete the audit process, 

however, PBGC requires its actuaries to create estimation programs or procedures to 

determine whether any benefits in pay status are likely to be affected by the legal limits 

on PBGC benefits. If a participant's benefits are likely to be affected by legal limits, 

PBGC's actuaries calculate a new estimated PBGC benefit, and PBGC reduces the old 

estimated benefit the participant was receiving to avoid the hardship that might 

otherwise be caused by the need to repay an even larger overpayment amount. In your 
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case, P.BGC's initial review of your benefit in pay status did not result in a finding that an 

ERISA limitation would likely cause a significant reduction in your final PBGC benefit. 

The Appeals Board has reason to believe that, in most cases, the estimation 

programs and procedures developed by PBGC's actuaries result in estimated benefit 

amounts that are very close to final PBGC benefit amounts. Nevertheless, errors do 

sometimes occur. 

It is because errors do sometimes occur that PBGC generally does not issue 

formal determination letters until after it has completed its audits of a plan's records. 

Thus, when PBGC sent you and most other Flight Attendants a letter on February 14, 

2005, telling you that PBGC had become trustee of the FA Plan, it forewarned retired 

Flight Attendants that the benefits they would receive during PBGC's review of the 

FA Plan's records were only estimated benefits, as follows: 

First, we want to assure you that you will continue to receive benefits without 

interruption while we review your plan's records. These payments will be an 

estimate of the benefits that we can pay you under the law. Once we finish our 

review, we will tell you in writing what your pension amount will be and what 

rights you have to appeal our decision. 

The Appeals Board certainly regrets any hardship that may result from the fact 

that PBGC's initial review did not identify a need to reduce your estimated benefit. As 

we explain later in this letter, however, Congress has limited the amount of a plan's 

benefits that PBGC may pay. 

3. Your Full Plan Benefit 

Enclosure 1 shows that US Airways calculated your full FA Plan benefit payable 

under the Plan's Level Income Option ("LIO") to be $2,381.73 per month from June 1, 

2004 through July 1, 2006, and $1,155.63 thereafter. PBGC's actuaries reviewed 

US Airways' calculation of your full Plan benefit amounts and accepted those amounts. 

The Appeals Board also accepted US Airways' calculation of your full Plan benefit. 

4. Your Guaranteed Benefit 

Your PBGC-guaranteed benefit payable under the Plan's LIO form is less than 

your full FA Plan benefit because your benefit is affected by one of the legal limitations 

on PBGC benefits.1 The legal limit that affects your benefit is called the Accrued-atNormal-Retirement limit (the "AAN limit"). 

The AAN limit 1s described in PBGC's regulations. PBGC's regulation on 

Benefits Payable in Single-Employer Plans (29 · Code of · Federal 

1 PBGC's determination letter said that your benefit was also affected by the Five-Year Phase-In 

limit. After a close review of the Phase-In calculations, however, the Appeals Board decided that 

your benefit is not affected by the Phase-In limit. 
,, '-' .)1 

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Regulations§ 4022.21 (a)) states that PBGC may not guarantee any portion of an earlyretirement supplement that, when added to your regular monthly benefit, exceeds the 

benefit that you would otherwise receive under the Plan at your normal retirement age 

in the form of a Straight Life Annuity ("SLA"). 

We determined that, if you had waited until your Normal Retirement Age (age 65) 

to start receiving your benefit and had elected to receive your benefit in the form of a 

SLA, your benefit would have been $1,391.78 because $1,391.78 = $594.89 + $796.89, 

where $594.89 is the US Airways part of your accrued benefit that would be payable at 

age 65 calculated under the formula that provides the higher benefit (see line 2 on the 

fourth page of Enclosure 1 ); and $796.892 is your net accrued benefit that 

would be payable at age 65. This $1,391.78 amount is what PBGC generally calls your 

AAN limit amount. 

As shown on the second page of Enclosure 1, if you had elected to receive your 

benefit in the form of a SLA starting on June 1, 2004, your Plan-defined benefit payable 

before you attained age 62 would have been $1.768.23 and your Plan-defined benefit 

payable after you attained age 62 would have been $1 ,281.58. The difference between 

these amounts ($486.65) is your early-retirement supplement. 

In your case, because an early-retirement factor was applied in calculating your 

benefits under the Plan, a portion of your $486.65 early-retirement supplement is 

guaranteed by PBGC. The portion of your early-retirement supplement that is not 

guaranteed is equal to $1,768.23 minus $1,391.78 = $376.45. Therefore, the portion of 

your $486.65 early-retirement supplement that is guaranteed by PBGC is $110.20, 

where $110.20 = $486.65 minus $376.45. 

Although you did not elect to receive your benefit in the form of a SLA, the 

portion of your early-retirement supplement that is not guaranteed by PBGC is the same 

because the Plan's LIO form of benefit is actuarially equivalene to the Plan's SLA form 

of benefit. Therefore, your final guaranteed benefit payable under the Plan's LIO form 

of benefit is $2.005.28 before age 62 and $1.155.63 after age 62, where $2,005.28 = 

$2,381.73 minus $376.45. 

2 We note that $1,283:54 is your gross accrued benefit under the where $1,283.54 

= 2% x $3,348.36 x 19.1667, and $486.65 is equal to one-half of your estimated Social Security 

benefit as defined in the I lcsee line 3 on the fourth page of Enclosure 1 ). Thus, if 

you had waited until age 65 to retire, the I I part of your accrued benefit payable as a SLA 

would have been $1,283.54 minus $486.65, which equals $796.89. 

3 PBGC's regulation (2.9 Code of Federal Regulations§ 4022.21 (b)) provides an explicit exception 

to the Accrued-at-Normal-Retirement limit for "early-retirement supplements" that result from a 

participant's election of an LIO form of benefit if the LIO form is the actuarial equivalent of the 

plan's SLA form of benefit. 
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5. Allocation of the Plan's Assets, Your Category 3 Benefit and Your Final PBGC 

Monthly Benefit 

When PBGC becomes trustee of a terminated plan, the assets remaining in the 

plan's trust are transferred to PBGC. If a plan has no assets at all, PBGC generally 

pays most participants only their guaranteed benefits. If a plan has some assets, PBGC 

must sometimes pay benefits in addition to guaranteed benefits. 

ERISA requires PBGC to categorize a plan's benefits among six priority 

Categories. PBGC then allocates the plan's assets to the value of the plan's benefits in 

order of priority. The Appendix is a standard PBGC information sheet. It describes the 

Categories that PBGC uses to allocate a plan's assets. 

After deciding that your Plan had neither Category 1 nor Category 2 benefits, 

PBGC estimated the value of all participants' Category 3 benefits, and found that the 

Plan's assets were sufficient to pay for 1 00% of the Plan's Category 3 benefits (but 

insufficient to pay for all Category 4 benefits). 

PBGC determined that a portion of your full FA Plan benefit is a Category 3 

benefit because you were eligible to start receiving a benefit from the Plan at the 

beginning of the three-year period that ended on the Plan's termination date. In other 

words, as of January 10, 2002, you met the eligibility requirements under the FA Plan to 

start receiving an immediate benefit because the Plan's earliest Early Retirement Age is 

55 for those participants who have at least 10 years of Credited Service and, as of 

January 10, 2002, you had already attained age 55. 

The amount of your monthly Category 3 benefit is calculated based on an annuity 

starting date ·of January 1, 2002, because that was the last date you could have retired 

under the Plan to be in pay status on January 10, 2002, except that the provisions used 

to calculate your Category 3 benefit are the provisions of the Plan that were in effect as 

of January 10, 2000. Thus, changes in the Plan's provisions that were adopted during 

the last five years before the Plan terminated are ignored (unless the changes would 

result in a lower benefit). 

The Appeals Board calculated your Category 3 benefit to be $1,631.90 before 

age 62 and $1,036.03 after age 62, if paid in the form of a SLA. Enclosure 2 shows 

how the Appeals Board calculated your Category 3 benefit. Thus, the amount of your 

early-retirement supplement if you had started receiving your benefit on January 1, 

2002 would have been $595.87. The portion of this supplement that could not have 

been guaranteed (if you had started receiving your Plan benefit as of January 1, 2002) 

is equal to $1,631.90 minus $1,391.78 = $240.12, where $1,391.93 is the AAN limit 

amount that we calculated on page 5 above. 

The Appeals Board also calculated your full Category 3 benefit in the form of an 

LIO to be $1,969.94 before age 62 and $847.94 after age 62. Thus, the portion of your 
.. 

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full Category 3 benefit that could have been guaranteed is $1,729.82 before age 62 and 

$847.94 after age 62, where $1,729.82 = $1,969.94 minus $240.12. 

In general terms, when .a participant's guaranteed benefit is larger than the 

portion of the participant's funded Category 3 benefit that could be guaranteed, PBGC 

pays the guaranteed benefit because it is the larger of the two benefits. In your case, 

your guaranteed monthly benefit ($2,005.28 before age 62 and $1,155.63 after age 62) 

is larger than the portion of your full Category 3 benefit that could be guaranteed 

($1 ,729.82 before age 62 and $847.94 after age 62). Therefore, you are entitled to your 

guaranteed benefit of $2,005.28 before age 62 and $1,155.63 after age 62. 

As noted above, however, for the FA Plan, PBGC determined that the full 

Category 3 benefits of every Flight Attendant who meets the eligibility requirements for 

a Category 3 benefit are covered completely by the Plan's final asset amount. As a 

result, PBGC will also pay you the portion of your Category 3 supplement that could not 

have been guaranteed, namely the $240.12 amount that we calculated on page 6 

above. 

Based on the above, the Appeals Board found that your full PBGC benefit is 

$2,245.40 before age 62 and $1,155.63 after age 62, where $2,245.40 = $2,005.28 + 

$240.12. Enclosure 3 is your Corrected Benefit Statement. 

6. Recoupment of Your Total Overpayment 

As we explained above, Congress has set limitations on the benefits that are 

payable from a plan's trust fund when a plan terminates. The legal limitations become 

effective on the plan's termination date. Once PBGC became trustee of the Plan on 

February 1, 2005, PBGC became responsible not only for making up any 

underpayments to FA Plan participants that occurred before and after PBGC became 

trustee, but also for collecting any overpayments made by the Plan before and after 

PBGC became trustee. Regardless of the cause of your overpayments (in this case, an 

inaccurate estimate of your guaranteed benefit}, it is clear that you have received 

payments that are higher than your guaranteed benefit amounts. 

Although PBGC could ask for repayment in a single payment with interest, 

PBGC's regulations4 provide for the recoupment of previous overpayments through 

small reductions in PBGC's benefit payments. The regulations generally limit the 

reductions to no more than ten percent of the final PBGC monthly benefits. If you and 

your spouse die before PBGC has collected your total overpayment amount, PBGC will 

not seek any repayment from your estate or your spouse's estate. Finally, PBGC does 

not charge any interest on the overpayments. All of these limitations on PBGC's 

recoupment of overpayments are designed to mitigate the potential hardship on PBGC's 

retired participants resulting from the need to repay large overpayment amounts. 

4 29 Code of Federal Regulations§ 4022.81. 
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While we regret any hardship that the recoupment reduction may cause, 

Congress has not authorized PBGC to pay you benefits that are larger than the benefits 

payable to you under the terms of the Plan and the provisions of ERISA 

Decision 

Having applied the terms of the FA Plan and the law to the facts in this case, the 

Appeals Board changed PBGC's determination by increasing your PBGC benefits. The· 

table on the first page of this decision letter summarizes the Board's changes. This 

decision is PBGC's final action regarding the issues raised by your appeal. If you wish, 

you may seek review of this decision in an appropriate federal district court. 

We regret the delay in responding to your appeal and appreciate your patience 

while we completed our review. If you need other information about your PBGC benefit, 

you may call PBGC's Customer Contact Center at 1-800-400-7242 and ask to speak to 

the authorized representative assigned to the FA Plan (Case 203572). 

Sincerely, 

Michel Louis 

Appeals Board Member