PBGC faces $17 billion in liabilities if AA terminates plans

The Pension Benefit Guaranty Corp. would be responsible for paying American Airlines Inc. employees' pension benefits if four underfunded plans are terminated./ AP PHOTO

FORT WORTH, Texas—If American Airlines Inc. terminates its four hugely underfunded pension plans, the responsibility for paying billions of dollars in benefits to plan participants will shift from the airline to the Pension Benefit Guaranty Corp.

This year, American Airlines estimates plan participants will receive just over $600 million in benefits if it doesn't terminate its pension plans. Benefit payments would increase to $678 million in 2013 and $738 million in 2014, according to a 2010 10-K report—the latest available—filed by parent company AMR Corp. of Fort Worth, Texas.

From 2015 through 2019, plan participants would receive $4.63 billion in payments from the airline's plans.

If the plans are terminated, the PBGC would be responsible for paying the bulk of those promised benefits.

The PBGC says that according to its preliminary estimates, it would be liable for a total of about $17 billion in benefits earned by American Airlines employees, retirees and dependents.

The PBGC does not have a breakout of the benefit payments it would have to make over the next seven years.

The PBGC, though, would not be liable for all pension benefits earned by the airline's employees and retirees. The maximum annual benefit—payable at age 65—guaranteed by the PBGC is $54,000 for plans that terminated in 2011, and nearly $56,000 for plans terminating this year.

Some veteran American Airlines pilots, for example, have earned bigger benefits, which they would lose if the plans are terminated.