Executive Pension Plan Status?
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BoeingBoy
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While I don't know about AA's executive pension plans - don't even know if they're DB or DC plans or what and too lazy to look - in general the executives come out fine in bankruptcy. No different than employee contracts - your's can be rejected after the procedural steps have been followed but the execs almost never have their employment contracts touched. There are more changes when a court-appointed trustee takes over running the company during bankruptcy or in a chapter 7 bankruptcy (liquidation).
Sometimes execs will voluntarily take paycuts, but that's unusual in big company bankruptcies. There's also the stock option angle - all the stock options that the execs get (that are valued in the millions) that haven't been exercised become worthless like any shareholder's shares. So that is effectively a retroactive pay cut - something that was supposedly worth millions in income in the year issued (how many millions was Arprey "paid" some years?) ends up being worthless.
Jim
Sometimes execs will voluntarily take paycuts, but that's unusual in big company bankruptcies. There's also the stock option angle - all the stock options that the execs get (that are valued in the millions) that haven't been exercised become worthless like any shareholder's shares. So that is effectively a retroactive pay cut - something that was supposedly worth millions in income in the year issued (how many millions was Arprey "paid" some years?) ends up being worthless.
Jim
eolesen
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AA has indicated that the management pension is being terminated along with all the others. There is no standalone executive pension plan as far as I or my wife know of (she worked in benefits before her job was eliminated in late 2002).
The Supplemental Exec Retirement PLAN (not pension) still exists, and is just like the Pilot's B-Fund -- a non-qualifying plan for PBGC protection.
Up until 2003, it was simply paid out of company funds; in 2003, it was placed into a trust and seeded (partly funded). If anything, AA was pretty arrogant for not having established it as a trust from Day One of the SERP (which was some point in the early 1980's).
Again, its no different from protecting other non-qualifying plans like the B Fund, prefunding contributions, or even a 401K if the company were managing that instead of handing it over to JPM...
And also, do try to remember that the SERP some of you like to villify is what is paying out Crandall's retirement benefit.
If you find it necessary to attack the SERP, just be sure to answer these two questions:
Should Bob & Jan Crandall have to take a hit and pay for mistakes made 10 & 15 years after Bob retired?
Should Bob Baker's or Max Hopper's widow have to pay the price for actions that took place long after their husbands had retired and/or passed away?... (Max was the brains behind Sabre's creation)
If you can answer yes to either question, then maybe you need to also suggest that the court go after the lump sums of pilots who cashed out, including those who did so ten and fifteen years ago...
The Supplemental Exec Retirement PLAN (not pension) still exists, and is just like the Pilot's B-Fund -- a non-qualifying plan for PBGC protection.
Up until 2003, it was simply paid out of company funds; in 2003, it was placed into a trust and seeded (partly funded). If anything, AA was pretty arrogant for not having established it as a trust from Day One of the SERP (which was some point in the early 1980's).
Again, its no different from protecting other non-qualifying plans like the B Fund, prefunding contributions, or even a 401K if the company were managing that instead of handing it over to JPM...
And also, do try to remember that the SERP some of you like to villify is what is paying out Crandall's retirement benefit.
If you find it necessary to attack the SERP, just be sure to answer these two questions:
Should Bob & Jan Crandall have to take a hit and pay for mistakes made 10 & 15 years after Bob retired?
Should Bob Baker's or Max Hopper's widow have to pay the price for actions that took place long after their husbands had retired and/or passed away?... (Max was the brains behind Sabre's creation)
If you can answer yes to either question, then maybe you need to also suggest that the court go after the lump sums of pilots who cashed out, including those who did so ten and fifteen years ago...
jimntx
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How cute! I find that level of naivete refreshing in someone your age.
The executive pensions could not be safer if they were stored at Fort Knox.
Frank Szabo
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Wretched Wrench
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That begs the question, "Should ANY retired employee have to pay the price for actions that took place after they retired?" Does your compassion for retired execs extend to the retired rank and file, as well?
Stretching things a bit, aren't we?
That would be akin to taking back an artificial limb if a new medical plan disallowed them. (See, I can stretch, too. 🙂 )
BoeingBoy
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I would hazard a guess that no retired employee will pay a price for actions that took place after they retired. Not knowing the funding levels of the various DB plans, I suppose anything is possible but it's highly unlikely.
As I believe both FWAAA and E have said, most employees (current and former) will get the benefit they've earned, which for current employees shouldn't be confused with the benefit they would have gotten at their full retirement age.
Jim
Wretched Wrench
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I believe it is a certainty that retirees will lose all retirement medical benefits, including the ones they already paid for and are continuing to pay for.
And, as AA refunds the prefunding already paid, they will say, "Thanks for the interest-free loan, suckers."
BoeingBoy
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My mistake, I thought you were talking about the retirement plans. At least for the pilots (my main area of curiousity) it appears that they can continue on the company plan till Medicare eligible at their own cost. I'd have loved having that option after US' two bankruptcies. Because of age and a medicine I was taking my and my wife's health insurance was over $4000/month after Cobra ran out. The HCTC paid 65% of that (one of the few benefits to having the PBGC take over the pension), but it was still a big bill every month. So paying for company coverage would have been a bargain.
Jim
jimntx
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Not only will those of us who have been paying prefunding for years get a refund of our prefunding money (minus administrative costs, of course) and no retiree medical, the company terminated retiree medical for all non-union employees a few years ago--including people who were already retired. They simply announced one November, that effective January 01 of the next year, all retiree medical would cease. "Happy Thanksgiving, Merry Christmas, and we do hope you are old enough to qualify for Medicare; otherwise, those premiums are going to be a booger."
I thought oil company executives were cut-throat, but AMR executives not only make oil company folk look like missionaries, they have not a shred of ethics or honor. You can say (and E and FWAAA will), "It's just business," but there is a particularly hot corner of hell reserved for this bunch at AMR. I do not know how they sleep at night.
BoeingBoy
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As I said to the poster that post was addressed to, I thought he/she was talking about the DB retirement only so my answer was only meant to apply to that.
Jim
