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August 01, 2002
Former Pilots Sue For Pension Shortfall
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The law firm representing the pilots said the suit represents more than 1,000 pilots, all of whom claim that the pensions they are receiving are much less than originally promised, according to the Web site, PlanSponsor.com.
As part of the 1992 acquisition of TWA, Icahn made an agreement with PBGC, the unions and the airline's creditors in which Icahn had to put $200 million into the airline and assume liability for its pension plans.
But the agreement also stipulated that Icahn reserved the right to terminate the plans at any time after 1995, PlanSponsor.com reports. Subsequently, TWA's employees and creditors assumed ownership and a bankruptcy court approved the final agreement in 1993. Pension plans were frozen and no new benefits could be added to them.
According to PlanSponsor.com, Icahn terminated the plans in 2000, which placed both the Pilot's Pension Plan and the Employees' Pension Plan (collectively underfunded by more than $700 million) with PBGC.
The current complaint states that the termination was a violation of the Employee Retirement Income Security Act (ERISA). In addition, pilots allege that Icahn tricked them into reducing their wages and benefits in exchange for stock equity and enhanced retirement benefits. But the Employee Stock Ownership Plan was rendered virtually worthless after the company filed for bankruptcy.
According to PlanSponsor.com, the pilots also claim that Icahn, when forced to fully fund the retirement plans, "made a deal with the unions and the PBGC to gut the plans without even asking for our input or opinions."
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