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CONSTITUTIONALITY OF DANFORTH AMENDMENT SOUGHT BY PBGC

 CONSTITUTIONALITY OF DANFORTH AMENDMENT SOUGHT BY PBGC
 WASHINGTON, April 22 /PRNewswire/ -- The Pension Benefit Guaranty Corporation (PBGC) today asked the U.S. District Court in Kansas City, Mo., to declare constitutional legislation that holds the subsidiaries controlled by Trans World Airlines owner Carl C. Icahn liable for TWA's estimated $1.1 billion pension underfunding as long as Icahn directs the airline's management and policies.
 "We are concerned that if the legislation, known as the Danforth Amendment, were successfully challenged by Icahn after a reorganization of TWA in bankruptcy, PBGC would lose its claims against Icahn's other companies. We want to establish the validity of the legislation while Icahn and the entire controlled group are still accountable for the TWA plans," said PBGC Executive Director James B. Lockhart.
 Noting that the pension insurance program has suffered back-to- back annual termination losses of $1 billion and is faced with a $2.5 billion deficit that is growing, Lockhart added, "We will take the necessary steps to protect the pension safety net and the retirement security of the 40 million Americans who participate in the pension plans we insure."
 When an underfunded pension plan insured by PBGC terminates, the plan sponsor and its commonly controlled affiliates are jointly and severally liable to PBGC for the underfunding. Common control generally means 80 percent common ownership. Icahn has proposed a plan of reorganization that breaks up the controlled group by dropping the group's ownership of TWA below 80 percent and, absent this legislation, would relieve them of liability if the TWA plans terminate.
 Under the legislation -- an amendment introduce by Sen. John C. Danforth (R-Mo.) as part of the Dire Emergency Supplemental Appropriations Act of 1991 -- members of the controlled group as of Oct. 10, 1991, or their successors will continue to be liable for the plan underfunding as long as Icahn continues to direct TWA's management and policies.
 Financial information provided to PBGC by TWA and publicly available information indicates that TWA and its controlled group could pay most of the unfunded pension liability in the event the plans terminate. However, recovery from TWA alone would be significantly less.
 To support its concern that the amendment will be challenged following a reorganization of TWA, PBGC points out in its court filing that in late November, Icahn transmitted a facsimile message to members of Congress challenging the constitutionality of the Danforth amendment.
 Without resolution of the constitutionality of the amendment, PBGC is unable to determine whether the pension underfunding will increase unreasonably if the plans are not terminated, and whether termination is necessary to protect the interests of the participants.
 In light of Icahn's expressed intention of TWA emerging from bankruptcy by the end of July, PBGC has requested an expedited hearing on the matter.
 PBGC filed its action in the U.S. District Court for the Western District of Missouri because the plans -- the Retirement Plan for Pilots of Trans World Airlines, Inc., and the Trans World Airlines Retirement Plan and Trust -- are administered in Kansas City, Mo.
 PBGC is a federal agency created under Title IV of the Employee Retirement Income Security Act of 1974 to guaranty payment of basic benefits earned by more than 40 million American workers and retirees participating in about 85,000 private-sector defined benefit pension plans.
 -0- 4/22/92
 /CONTACT: Judith E. Bekelman, director, communications & public affairs, or Andy Gasparich, public affairs specialist, Pension Benefit Guaranty Corporation, 202-778-8840/ CO: Pension Benefit Guaranty Corporation; Trans World Airlines ST: District of Columbia, Missouri IN: AIR SU:


MH -- DC013 -- 1383 04/22/92 15:02 EDT
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Publication:PR Newswire
Date:Apr 22, 1992
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