#'% Pension Benefit Guaranty Corporation PBGC c,~~~.,.,,,,.87 van... 1200 K Street, N.W.. Washington, D.C. 20005-4026 

1 MAR 2 1 2003 

Re: Appcal Wn An~crican World Airways. Inc. Ikfincd 

Ikncfit Plan for ]'light Iinginccrs (Plan or l'E Plan) 

Thc Appeals I3oat.d rcvicwcd your appcal of PllGC's lkbruary 28, 1997 dctcrmination of 

your bcncfit. We appmiate your patience whilc thc appl was pcnding and apologize for thc delay. 

For thc n'asons statctl below, thc Appcals lloard found no basis presented for changing thc 

tlctcrniination of your PBCiC hcncf~t amount. 'I'hc Iloard notcd, howcvcr. that PRGC has changed 

its tncthod for adjusting bcncf~ts for prcvions ovcrpaymcnts. As dcscribd bclow, the changcs an: 

basul on amcndnlcnts to PRGC regulations that result in a sniall untlcrpaymcnt balancc for you now. 

I'lKiC's lnsurancc Opcrations ncprtmcnt will contact you dircclly about thc make-up paynicnt. 

WGC Dctcrmination and Your A& 

IWGC dctcrrnined you arc cntillcd lo a Joint and 100% Snrvivor Annuity (1R.l DD%SA) of 

$1,524.93 pcr month, which is grcatcr than the $1,504.18 estimated bcnefit you are receiving. 'I'bc 

lcttcr included a ncncfit Statctncnt showing how your bcnclit was calculated and that the forni of 

your bcncfil inclndcd a Modified Cash Refund fcaturc (MCR) PnGC explained thcy had both 

over- and underpaid you, thc net ovcqxiynlcnt was $2,041.33 at that time, you could rcpay in lump 

sum, and if you choosc not to rcpay hy that mcthod PI3GC would rccoup by pcrmancntly rcducing 

your futc~rc $1,524.93 paylncnls by $22.05 to $1502.88. 

Your April 11,1997 appcal statcd that PI3GC's ". . . lcttcr provided no calculations to explain 

how I havchcen overpaid. The calculation oflrAS-5 (Vinal Average hmings) of $72,797.04 is in 

variancc to my cstinirtcd FAS-5 of approximately $90,000.00. See enclosed pay stubs. Pagc 2 of 

I'BGC calculations show 'I'orm adjustment factor' of .7292 on linc (8) and ,7262 on linc (9). . . . Onc must bc incorrect. I am appealing this changc in my bcnclil until the PBGC can verify their 

calculations and provide more complclc dam addiessing thc factors . . .." 

Your PBGC Dcncfit Stalcment shows you WCI-c born October 18, 1927. wcrc hircd June 16, 

1954 and rctircd on May 1, 1991 at agc 63. 1)ocumcnts in PBGC files show you chose thc 

J&100%SA fom of bcncfit whca you rctiretl and thc 111 Plan bcgan paying you $1.629.32 pcr 
n~onth, which is cquivalcnt to thc amount of a your "Singlc life Annuity with Ikath 13encfit" 

(Sl .AflXl), thc Plan's nom~al annuity form, of $2,232.86 (see I?nclosun I). The file also shows that 

cfkctivc Ihcemhcr 31. 1983, hcncfit accruals under thc FI! Plan were frozcn. Thus, no credit can 

he grantcd for scrvicc or earnings afkr that date. l'hc 1% Plan cndcd on luly 31, 1991. 

Whcu IWGC is appojntcd trustce of a tcrminatcd pension plan, it pays bcnefits on an 

estimated basis. Iistimatcd paymcnts are intcndcd to minimime financial hardship for rctirees while 

I'HGC is preparing formal bencfit dctcrminations. I>uring this pcriod P13GC complctcs sevcral tasks, 

including: (I) the audit of plan rccords; (2) the calculation of PBGC benefits; and (3) thc pepatation 

and mailing of PHCiC dctcrmination lcltcrs and bcncfit statcmcnts. A parlicipant conlinucs to 

rcccivc cstimatcd bcncfits until his or her hcncfit dctcrmination bccon~cs final. 

I'hc diffcrcncc hctwccn your t;lJ Nan bencfit calculated by thc former 17fi Plan Administrator 

and your I'BGC payment is duc, in pail, to legal limits on guaranteed benefits prescribed by thc 

lim~~lorc Rctircn~cnt lncomc Sccurity Act of 1974, as amcndcd (ERISA). Your I'I! Plan hcncfit is 

rcdk&l hy P:KISA7s "Maximum ~ua&ntood Ilcncfil" (MGI)) limitation.-& ERISA 5 40220(3); 

LillSO 29 Codc of Fcdcral Kcgulations (C.1J.K.) F, 4022.22. Pl3GC also pays benefits based on (1) - a priority allocation of a plan's assets as of thc plan termination date (~'.GSA F, 4044). and (2) a 

~wrtion of PBGC's recovcncs on certain legal claims (I!RISA 8 4022(c) benefits). We explain your 

MF13 and your plan asscl and 4022(c) hcncf~ls hclow. 

l~lnrl Average Ihrnings 

You cldmcd that tbc 5-ycar Final Avcrdgc liarnings (I'M-5) I'RGC used to compute your 

hcncfit is too low, and you subn~ittcd scvcral pay stuhs from 1987 through 1991 as cvidcncc. Ihc 

pruvisions of thc Plan prcscrihc thc lncthod for dctcrmining FAS-5. On August 10,1984, thc IZII 

Plan adoptcd Aincndnlcnt No. 1984-1 (A1984-I), which changcd the definition of Final Pay 

Compensation (Section 2.20) to mad: "An IPnploycc's gross rcmuncration through lkccmber 31, 

1983 including bonuscs and overtime pay, . . .." Final Pay Credited Service (Section 4.3) was 

amcndcd to pmvidc: "Thc pcriod of Final Pay Crcditul Scrvicc shall bc the aggngatc of thc 

following pcriods, without duplication or ovcrlap, hut only if such pcriod occurs prior to the 

Mcmhcr's 65th hitlliday aitd prior lo January I, 1984: . . .." 

l'hc lntcmal Kcvcnuc Scrvice (IRS) appmvcd thc rctroactivc cessation of the bencfit accruals 

c~adcr the Plan in accordance with section 412(c)(8) ofI!RlSA with thc condition that ,41984-1 was 

adoptcd hy August 16,1964. PBCiC files rcvml that A1964-1 was adoptcd on August 10,1984. lhc 

Appals iloard, thcrcforc, found that A1984-1 was propcrly adopted. Thus, undcrthc terms of the 

IYi l'lati, only compcnsalion and scrvicc you carncd prior lo January 1, 1984 may hc uscd to computc 

your 14'. Plan bcncfit. I'.,~closurc 2 is a copy of thc 1'1; Plan record showing the computation of your 

1'AS-5. including thc total Compensation you rcccivcd during the five years (60 months) bctwccn 

January 1,1979 and Ilccemhcr 31,1983 ($363,985.39, or a 5-ycar avcragc of $72,797.08). 
l'hc MGl3 for plans tcnainating in 1991, such as your Nan, payable in the fonn of a Straight 

Iifc Annuity (S1.A) with hcncfits commcncingat age 65 is $2,250.00 per month. l'his amount is 

adjnstcd for a participant's agc at the lalcr of hisher hcncfit commencement date and the plan 

tcrtnination datc and for an annuity fonn other than m S1.A. You retired hcforc the I'li Plm ended. 

Pcr PIIGC regulations, the agc ad.jtjustmcnt factor for your MGR is 0.9lB hased on your age 63 years 

and 10 months (months roundcd up) as of thc Plan lcrniination datc. 

Ilx rcgulatiou prcscrihes a factor of 0.8000 10 convert an SIA to a J&100%SA whcrc the 

rctircc and s usc arc the sanlc agc, ncarest hhlhday, as of the detcrinination date. At that time you 

wcrc 64 and r-1 was agc (hascd on hcr hirth date ofyl. Ibe factor for a 

9-year age diffcrencc is 0.9100. Thus, the S1.A-to-J&IOO%SA conversion faclor for your MGli is 

0.7280 (0.800 x 0.9100). 

Iktlly, the ~ules mluirc that an MGII be adjustcd for the possibility PItGC would pay 

hcncfits aficr both thc mtirce and spouse dic (the MCR feat~~re of your annuity), which assures that 

hcncfit paymcnts qua1 at least the amount of the reti~ec's "Cash Vestcdk;mployee Contributions" 

(CVlK) as of thc dctcnnination datc. Your I'BGC Ikncfit Statcmcnt lists amount as $45,401.94 for 

you, which would be rcturncd with 27.86 monthly payincnts remaining of your fill1 I+? Plan hcncfit 

($45,401.94 + $1,629.32 = 27.87). The rules adjust thc MGB for a 27-month refund pcriod (rounded 

down) hy a factor of 0.989888 (1124% for each of the first GO months = 1- 1.01 x 1/24 x 271). 

l'hc MCi13 with thesc adjust~n'nts cquals is $1,487.33 ($2.250.00 x 0.9183 x 0.7280 x 

0.9888). This amount is sonlcwhat lcss than the MGIt ($1 ,.M0.42) shown on line (9) of your IWCiC 

Iicncfit Statcmcnt. IIowcvcr, given the complex nature of this computation and thc undcrstaoding 

that I'l3GC's determination may havc ecmploycd sonlc assumplions iavorahle to you, thc Appcals 

lsoard acccptcd as correct the $1,500.42 amount PIIGC calculated as your MGK 

Your Iimcfit from the 1W I'laa Asset Allocation 

When the FIi Plan lenninalcd, ils asscts could fund only some of its promiscd hencfits. To 

tlcterminc hcncfits for participants, the FJ'liI'lan providcs for thc assignment of Plan benefits anlong 

six "priority catcgorics" (ITS) pt-cscrihcd by IiKISA 5 4044 and fw the allocation of Plan asscts to 

thc hcncfits in those catcgorics in a slwific ordcr, with both assets and benefits valued as of lhc 141 

l'lm's tcmiination datc. You will reccivc the gtcatcr of thc amount of your Ffi Plan benefit that is 

(1) covc1-cd hy the allocation of Plan assets or (2) guarantccd and payable by I'HGC.. 

'I'hc first two PCs covcr voluntary and mandatory cmployec contributions. PC3 cows 

hcncfits that were, or could havc bccn, in pay status thrcc years hefore thc I+: Plan tcrinination date 

loy-3) PnGC dctcrmincd that lili Plan asscts covcrcd all bcncfits in PCS 1 and 2, hut only 

62.300034% of the bcncfils in IC3. Your cntisc ]:I! Plan benefit is assigned lo PC3 bccause you 

wcrc 61 ycars of agc as of IIolT-3 and could haw hcce rccciving your normal retircmcnt (age 60) 
pcnsion if your cmploy~ncnl had cndcd hy that timc. Dascd on PRGC's dctcrnlination that the 

amount of your 115 Plan bcncfit as of I)oIrI'-3 would havc been $1,688.49,' your fundcd PC3 hcncfit 

is only $1,052.08 ($1,688.49 x 0.62309031). Ilccat~sc this amount is lcss than your $1,500.42 MGII, 

l?lOC will pay you the grcatcr guat.atttccd amotlnt plus you 4022(c) bcncfit, described next. 

Scction 4022(c) of ERlSA provides a porlion oi thc wfundcd hcnefits that PBGC docs not 

g~tarantcc based on amounts l'I%GC rccovcrs from sponsors of terminated. undcrrundcd plans (the 

4022(c) amount). IiRlSA assigns thc 4022(c) amount in thc order of I'CS described above. ]'or thc 

I:l! Plan, lWGC dctcrmincd that thc 4022(c) amount pays 13.034377% of all anftmderl 

nonguarantccd hcncfits in PC3. Your 4022(c) bcncfit is $24.51 (calculation shown bclow), and your 

told I'IKX-provicled benefit is $1,524.9.1 ($1,500.45 + $24.51), the same amount Pl3GC 

dctcrmincd. 

Your benefit assigncd to I'C.3: $1,668.49 

Irss: Your PIIGC-guaranteed bcncfit 1,500.42 

Equals: Your unfundcd PC3 hcncfit 188.07 

l'imcs: 4022(c) allocation factor .I3034377 

Ikpls: Your 4022(c) hcncfit $ 24.51 

Ovcr/llnderpaynlcnts and Weco~~pn~ent 

Wtien thc1'1': Plan ended July 31. 1991 you wctc mciving $1.629.32 pcr month. IXrectivc 

March I, 1993, PBGC reducul your hcncfit to an cstimatcd amount of $1,504.1 8, which you havc 

hccn receiving since that date. PBCiC's letter dated February 2, 1993 adviscd you of thc reduction 

and that the new amount was an estimate. 

IWGC dctcnnincd you wcrc ovcrpaid for 19 months at $1 12.24 per month or $2,132.56 119 

x ($1,629.32 - $1,517.08)] and underpaid for48 months (311193 - 2\28/97) at $12.90 pcr month or 

$619.20 [48 x ($1,517.08 - $1,504.18). for a nct ovcrpaymcnt, including intcrcst, of $2.041.33. It 

is not clear why this calculation used an amount of $1,517.08. Please note, howevcr, that due to thc 

continued undcrpaymcnt and PlIGC's reviscd nlcthod of calculating the net ovcrlunde~ayn~cnt 

balance, which is favorahlc to you, you will havc a net ilndcrpaymcnt amount of approximately $573 

if your monthly paymcnl is incrcascd to $1.524.93 of the next PIKE pay adjustment dare, May I, 

2003. 

' $i.G88.49 equals your $2.232.86 occrtd bhcnefir as an Sl.MW5 adjuucd by a factor 010.7562 for the 

18 IWMSA form as of I)nP1'3. This miiount is grratcr than your $1,629.32 181004hSA delcmiincd as of your 

aclual retiren~ent date due lo the operation of the fonn conversion factors based on different ages as of the two date. 
Ilaving applied the law, thc regulations and provisions of thc I'E Plan to the facts in this case, 

thc Appeals Board foirnd no basis prcscntccl in your appeal for changing PBGC's dctcnnination that 

you are cnlillcd to rcceivc a I& 100%SAIMCK of $1,524.93 pcr month. (IDlcase notc that thc MCR 

priod has now cxpircd.) l'hc Board also iound no hasis ior changing PBGC's dctcrminalion that 

Plan Amcndmcnt No. 1984-1, which fmc hcncfit accruals, is a valid Plan amendmcnt adopted 

August 10. 1984. 

lhe Appeals Isoard, howcvcr, changcd PIlCiC's determination by findi~~g that, duc to thc 

continued undcrpaymcnt and a change in I'IKiC n~lcs for dctcrn~ining the nct ovcr/undorpaymcnt 

amount, you now havc a net underpayment balance and will receive a make up paymcnt. PBGC's 

Insurance Operations Dcparlmcnt will contact you directly about this mattcr and thc jncmse in your 

Cuturc monthly payments from $1.504.18 to $1,524.93. 

This is thc final agcncy dccision on the rnatlcrs appcalcd and you may, if you wish, seek court 

rcvicw. 

Wc regret thc delay in our responsc and appreciate your paticnce whilc we rcviewcd your 

casc. We will scnd a copy of this lctlcr to 14KX's Insurance Opcrations Dcpartmcnt (]OD), thc 

officc rcsponsiblc for making I'I%GC dctcrminations and payments. 101) staff will increase your 

Iulurc monthly PlIGC paymcnts and dctcnninc thc exact amount of your make-up paymcnt as of thc 

chilngc datc. Mcanwhilc, if you nccd othcr information from PBGC. please call the Cnstomcr Service 

Ccnter at 1-800-100-7242. 

Sinccrcly, 

I larrict 11. Vc~.butrg u 

Chair, Appcals Roard