American International Group Inc. (AIG) will hold back $21 million in retention bonuses to its former employees, according to a Wall Street Journal report.

The company, which will pay out $46 million today in retention bonuses to about 70 employees, both former and current, has made the cut to meet a target imposed by Kenneth Feinberg, the U.S. Treasury Department’s compensation czar. The payout will go to the employees of its financial products unit. This unit’s performance was significantly responsible for the company’s fall-out during the financial crisis.

However, AIG believes that under certain circumstances the company can limit the payouts. Recently, the company had enquired its former employees about their earnings after they departed from AIG. The company is said to reduce the payouts of its former employees by that amount.

AIG received federal support worth $182.5 billion, which helped prevent its collapse in September 2008. The company, approximately 80% of which is owned by the U.S. government, came in under the scanner by the public after it paid out $165 million as bonuses to its employees last March.

Following the public outcry, Feinberg was appointed to supervise the executives’ compensation and bonus packages of AIG and some other companies, all of which had received taxpayers’ money. Feinberg then demanded that AIG should get back $45 million of bonuses the company paid last year.

AIG employees have agreed to return a total of $40 million by accepting lower bonus packages for 2010 for an early repayment of this amount. The remaining $5 million would be met through the $21 million cut.

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