Pension Benefit Guaranty Corporation PBGC 1200 K Street, N.W., Washington, D.C. 20005-4026 "S mbsw m 

OCT 2 8 2004 

Re: case 194025, Trans World Airlines, I~c. 

(TWA) Retirement Plan for Employees (the Plan) 

The Appeals Board reviewed your appeal of PBGC's February 27, 

2004 determination of your PBGC benefit. For the reasons stated 

below, the Board decided we must deny your appeal. 

Determination and Appeal 

PBGC determined that you were entitled to a PBGC benefit of 

$1,108.49 per month, which included: 

9 $852.81 per month from the Ozark Air Lines, Inc. (Ozark) 

Retirement Plan for Aircraft Mechanics Fraternal Association 

Employees (the Ozark Plan) starting on March 1, 2014 payable 

as a Five-Year Certain and Continuous Annuity; 

> $55.08 per month from the TWA Retirement Plan for Mechanics 

and Related Employees, Dining Service Employees and Passenger 

Service Employees (the Mechanics Plan) starting on March 1, 

2014 payable as a Straight Life Annuity (SLA); and 

9 $200.60 per month from the TWA Retirement Plan for NonContract Employees (the Non-Contract Plan) starting on 

March 1, 2011) payable as an SLA. 

PBGC included Benefit Statements showing data used to 

calculate your benefits and also showing that PBGC accepted TWA'S 

and Ozark's calculations of your monthly accrued benefits. The 

Benefit Statements also indicate monthly benefit amounts that would 

be payable to you at your earliest retirement date. 

PBGC's records show that you elected to start receiving your 

benefit under the Plan effective March 1, 2004 payable as a Joint 

and 100% Survivor Annuity, which provides a monthly benefit for 

your lifetime and should you die first, your eligible spouse would 

receive the same monthly amount for her remaining lifetime. The 

records show that you are receiving a total monthly benefit of 
$524.30 ($384.35 under the Ozark Plan; $24.00 under the Mechanics 

Plan, and $115.95 under the Non-Contract Plan). 

Your February 28, 2004 e-mail said that your accrued benefit 

amounts appeared to be correct but that you disagreed with the 

early retirement reduction factor of 50% that PBGC used to 

calculate your benefits. 

PBGC responded in an April 5, 2004 letter, stating that: 

". . . Pursuant to Section 4022.4 of PBGC's regulations, entitlement to a benefit is based on 

the provisions of the plan and the participant's eligibility to receive pension benefits as of the 

 ate of Plan ~ermination (DOPT). - 

When your plan terminated on 01/01/2001. you had attained 51 years of age. Once the plan 

terminates, it is inactive and participants do not earn additional benefits under the plan. This 

means that participants cannot grow into an unreduced benefit as they get older even if they 

continue to be employed by the prior plan sponsor. As stated in the preceding paragraph, 

the PBGC pays benefits based on a participant's eligibility to receive them when the plan 

terminates. . . ." 

Your April 30, 2004 e-mail appeal claimed that: 

". . . Nowhere in our plan or PBGC regulations do you have carte blanche to group me with 

employees who terminate their employment before DOPT and appropriate my early 

retirement benefit under Article 4.4(a). Article 4.4(a), where you calculated my benefit, 

specifically pertains to employees who terminate (quit, resign. end, break off, discontinue) 

their employment after at least five years of service undertheirown volition and are therefore 

guaranteed a deferred vested retirement. ... " 

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 plan, 

PBGC becomes trustee of the plan and pays pension benefits as 

defined in the plan subject to limitations and requirements set by 

Congress under ERISA. 

Records available to the Appeals Board reveal that the Ozark 

Plan merged into the Mechanics Plan after TWA purchased Ozark Air 

Lines in 1986, and that the Mechanics Plan and the Non-Contract 

Plan merged into the TWA Retirement Plan for Employees (the Plan) 

in 1988. PBGC records show that the Plan terminated on January 1, 

2001 and that PBGC became the Plan's trustee on January 2, 2001. 

The records also indicate that you were actively employed by TWA 
when the Plan terminated. 

When the Plan terminated, it did not have sufficient assets to 

provide all Plan benefits. Therefore, the provisions of the Plan, 

the provisions of ERISA, and PBGC's regulations determine your 

benefit entitlement. 

Section 4022(a) of ERISA provides that, subject to certain 

limitations, PBGC will guarantee the payment of all nonforfeitable 

benefits under a covered plan that terminates. ERISA § 4001(a) (8) 

defines a "nonforfeitable benefit" as ". . . a benefit for which a 

participant has satisfied the conditions for entitlement under the 

plan or the requirements of [ERISA] . I' . 

PBGC regulations make it clear that a guaranteed benefit must 

be nonforfeitable on the participant's employment termination date 

or on the plan's termination date, whichever date is earlier. 

Specifically, 29 Code of Federal Regulations 4022.4 provides as 

follows : 

"5 4022.4 Entitlement to a benefit 

(a) A participant or his surviving beneficiary is entitled to a benefit if under the 

provisions of a plan: 

(1) The benefit was in pay status on the date of the termination of the plan. 

(2) A benefit payable at normal retirement age is an optional form of payment to the 

benefit othemise payable at such age and the participant elected the benefit 

before the termination date of the plan. 

(3) Except for a benefit described in paragraph (a)(2) of this section, before the 

termination date (or on or before the termination date, in the case of a 

requirement that a participant attain a particular age. eam a particular 

amount of service, become disabled, or die) the participant had satisfied the 

conditions of the plan necessary to establish the right to receive the benefit 

prior to such date (prior to or on such date, in the case of a requirement that a 

participant attain a particular age, earn a particular amount of service, become 

disabled, or die) other than application for the benefit, satisfaction of a waiting 

period described in the plan, or retirement; or 

(4) Absent an election by the participant, the benefit would be payable upon 

retirement. . . . " (Boldface added.) 

2. Your Ozark Plan Benefit 

Ozark Plan section 4.3 (see page 1 of Enclosure 1) 

specifically provides: 
"Special Early Retirement: Any Member who is terminating employment with the Company 

after attainina his 55Ih birthdav and fulfills the reauirernents of the 'Rule of 85' ... shall 

receive monthTy retirement benefk commencing at an Early Retirement Date which shall be 

the first day of the month coincident with or subsequent to such Member's date of 

termination of employment." 

(Boldface added. ) 

Because you had not yet attained age 55 as of January 1, 2001, 

you could not have terminated employment at that time with 

eligibility for Special Early Retirement under Ozark Plan 

section 4.3. Thus, you did not satisfy the Ozark Plan's conditions 

for entitlement to Special Early Retirement under Ozark Plan 

section 4.3 on or before the termination date. So, ERISA and PBGC 

regulations do not allow PBGC to guarantee a Special Early 

Retirement benefit under Ozark Plan section 4.3 for you. 

Please note that the Appeals Board is without authority to 

change the provisions of the Plan, ERISA, or PBGC regulations. 

Instead of being entitled to a Special Early Retirement 

benefit under Ozark Plan section 4.3, you are entitled to "a vested 

Monthly retirement benefit" under Ozark Plan section 8.1 (see 

Enclosure 2) . Section 8.1 states that your "vested Monthly 

retirement benefitN is payable "beginning on (your) Normal 

Retirement Date or an Early Retirement Date, determined in 

accordance with Section 4.1 or 4.4." So, because you elected to 

start receiving your benefit on an Early Retirement Date, PBGC 

calculated your benefit in accordance with section 4.4. 

Ozark Plan section 4.4 (see page 2 of Enclosure 1) states that 

your benefit must be "reduced by 5/12 of 1% for each month by which 

(your) Early Retirement Date precedes (your) Normal Retirement 

Date." Ozark Plan section 4.1 (see page 1 of Enclosure 1) defines 

your Normal Retirement Date as "the first day of the month 

coinciding with or next following (your) 65th birthday." SO, 

because there are 120 months between your Actual Retirement Date 

(March 1, 2004) and your Normal Retirement Date (March 1, 2014), 

the Ozark Plan requires a reduction of 50% (120 x 5/12 x 1%) for 

early commencement. The Appeals Board is without authority to 

change the provisions of the Ozark Plan with respect to this 

required reduction. 

3. Your Mechanics Plan Benefit 

Mechanics Plan section 4.2 (a) (see page 1 of Enclosure 3) 

specifically provides: 
"Eligibility: AParticipant shall be eligible to receive an early retirement benefit underthe Plan . . . upon termination of his employment because of his retirement after he has attained 

his fifty-fifth birthday and . . . after he has at least ten Years of Service." 

(Boldface added.) 

Because you had not yet attained age 55 as of January 1, 2001, 

you could not have terminated your employment at that time with 

eligibility for early retirement under Mechanics Plan section 4.2. 

Thus, you did not satisfy the Mechanics Plan's conditions for 

entitlement to early retirement from active service under Mechanics 

Plan section 4.2 on or before the termination date. So, ERISA and 

PBGC regulations do not allow PBGC to guarantee an early retirement 

benefit under Mechanics Plan section 4.2 for you. 

Instead of being entitled to an early retirement benefit under 

Mechanics Plan section 4.2, you are entitled to a deferred vested 

benefit under Mechanics Plan section 4.4 (see Enclosure 4) because 

you had more than five years of vesting service when the Plan 

terminated on January 1, 2001. Section 4.4 (a) (2) shows that you 

are entitled to start receiving your deferred vested benefit before 

age 65, but that the monthly amount is reduced by 5% for each year 

that your age at benefit commencement is less than 65. 

So, because you elected to start receiving your benefit at age 

55, Mechanics Plan section 4.4(a) (2) requires a reduction of 50% 

(10 x 5%) for early commencement. The Appeals Board is without 

authority to change the provisions of the Mechanics Plan with 

respect to this required reduction. 

4. Your Non-Contract Plan Benefit 

Unlike the Ozark Plan and the Mechanics Plan, the Non-Contract 

Plan did not provide special early retirement benefits for 

participants who continued in active service under the Non-Contract 

Plan until age 55. Thus, even though Non-Contract Plan section 3.1 

states that the Normal Retirement Age is the 65th birthday, NonContract Plan section 5.1 states that any vested Member is entitled 

to a benefit in accordance with the provisions of Article 4 and 

Article 4 provides for a benefit that is unreduced at age 62. 

Non-Contract Plan section 4.3 (see Enclosure 5) specifically 

provides : 

"Retirement Income at Earlv or Disability Retirement Date. A Member who retires after 

January 1. 1984 on an Early Retirement Date or a Disability Retirement Date or whose 

Service otherwise terminates on or after December 31,1983 may, at his election, receive 

the benefit provided under subsection (a) or (b) below. . ." 

(Boldface added. ) 
Thus, because you were fully vested in your accrued benefit as 

of January 1, 2001 under Non-Contract Plan section 5.1 (see 

Enclosure 6), you are entitled to a benefit calculated in 

accordance with Non-Contract Plan section 4.3 after attainment of 

age 55. Because you chose to start receiving your benefit before 

age 62, PBGC reduced your Non-Contract Plan benefit by 35% (84 x 

5/12 x 1%) for early commencement. Your appeal did not challenge 

your early commencement adjustment factor under the iion-Contract 

Plan. 

5. Your Guaranteed Benefit versus Your Plan Benefit 

A benefit of $55.08 per month starting before age 65 is more 

valuable than a benefit of $55.08 per month starting at age 65. 

The additional value is commonly called an early retirement 

subsidy. Mechanics Plan section 4.2 provides for such an early 

retirement subsidy, as do Ozark Plan section 4.3 and Non-Contract 

Plan section 4.3. As explained above, PBGC guarantees only those 

subsidies for which participants had satisfied the age-and-service 

eligibility requirements on or before the Plan's termination date. 

As you noted in your appeal, the Mechanics Plan does not refer 

to a Plan termination date when stating the requirements for early 

retirement under Mechanics Plan section 4.2. Instead, Article 10 

of the Mechanics Plan explains what happens upon termination of the 

Mechanics Plan. See Enclosure 7. Mechanics Plan section 10.2 

states that upon "termination, the Plan assets shall be allocated 

in accordance with Section 4044 of ERISA and applicable regulations 

thereunder to provide benefits to Participants and their 

beneficiaries . . . 

PBGC could pay you a benefit under ERISA § 4044 or 

ERISA 5 4022(c) in addition to your guaranteed benefit if you 

earned an early retirement subsidy through employment with TWA 

after the Plan's termination date and if the allocation of the 

Plan's assets or the Plan's § 4022(c) amount resulted in benefits 

payable by PBGC in Category 6. Enclosure 8, which is a standard 

PBGC information sheet, describes the ERISA-mandated priority 

categories that PBGC uses to allocate a plan's assets and § 4022(c) 

amount. 

Our review of PBGC'S actuarial valuation reveals that the 

Plan's assets and § 4022(c) amount were sufficient to pay for only 

a portion of the Plan's benefits in Category 5, and thus, there was 

no Plan money left over to pay for benefits in Category 6. So, 

regardless of whether you terminated employment while TWA was still 

a going concern, there is not sufficient Plan money to pay you any 
portion of the subsidy you may have earned after the Plan 

terminated. 

With respect to your suggestion that you "can grow into an 

unreduced (from 50% to 100% benefit) by 5% per year until age 65 

(age 62 under the TWA non-contract Plan)," the difference lies in 

PBGC's specialized use of the words "grow into." According to PBGC 

usage, one can sometimes "grow into" a subsidized early retirement 

benefit by meeting the minimum qualification requirements for that 

type of benefit based on service after a plan's termination date. 

In your case, you could not "grow into" a subsidized early 

retirement benefit under the Plan mainly because there was 

insufficient Plan money to pay for such a subsidy. In other words, 

even if you did "grow into" eligibility based on post-Plan 

termination service with TWA past your 55th birthday, you would not 

receive any additional benefit from PBGC because there is no Plan 

money to pay for the subsidy that that eligibility would entail. 

As your appeal stated, you could have waited until age 65 

before receiving your benefit and your benefit would have been 

unreduced for early commencement. Waiting until age 65 before 

receiving your benefit is not the same as "growing into" an 

unreduced benefit because no subsidy is gained by doing so. That 

is, whether you elect to receive your benefit starting at age 55 or 

at age 65 makes little difference because the benefit payable at 

age 55 under Mechanics Plan section 4.4 is generally the actuarial 

equivalent of the benefit that would be payable if you waited until 

age 65 to start receiving your benefit. 

Decision 

Applying Plan provisions, the law and PBGC's rules to the 

facts in this case, the Appeals Board 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. 

If you need more information about your benefit, please call 

PBGC's Customer Service Center at 1-800-400-7242. 

Sincerely, 

Michel Louis 

Appeals Board Member 

Enclosures (8)