Following A Different Path?

[eolesen]

Just in case there are still people convinced that the Company is going to kill off our pensions.... here it is in writing:

---AMERICAN AIRLINES, THE ALLIED PILOTS ASSOCIATION, THE ASSOCIATION OF PROFESSIONAL FLIGHT ATTENDANTS AND THE TRANSPORT WORKER'S UNION ISSUE JOINT LETTER TO SENATE FINANCE COMMITTEE ON PENSION LEGISLATION---

Today American Airlines, on behalf of its employees, and the presidents of the three labor unions issued the following joint letter regarding defined benefit pension plan legislation to the Finance Committee on Pension Legislation. The unions represent AA pilots, flight attendants, aircraft maintenance technicians, plant maintenance employees, fleet service employees, ground service employees, technical specialists, flight dispatchers, stock clerks, flight simulator technicians, ground school, flight simulator and pilot simulator instructors at American:

-----------------------------------------

TO: Honorable Charles Grassley
Honorable Max Baucus
United States Senate
Committee on Finance
Washington, DC

Dear Chairman Grassley and Senator Baucus:

Today the Finance Committee is holding a hearing on the crisis of pensions in the airline industry. Although American Airlines and its employees were not asked to appear as witnesses, we are keenly interested in the issue and are preparing a written statement that we respectfully ask to be entered into the record.

While the media has focused almost exclusively on the crisis precipitated by airlines abandoning or freezing pension plans, American and its employees are following a different path. We are, together, working hard to maintain our defined benefit pension plans. We urge the Committee to enact legislation that would give us the chance to do so.

To be clear, we understand the desire other companies have for legislation that allows companies, through the collective bargaining process, to freeze defined benefit plans and convert to other types of plans. This is a useful tool to have if necessary to prevent more drastic results. But we need legislation that does not require us to freeze our pension plans.

We hope not to resort to a freeze or to the termination of our pension plans. We need the help of Congress to enact legislation that provides a realistic and stable interest rate for calculating full funding and a reasonable period of time to amortize the amount necessary to achieve full funding -- all without limiting lump sums and other benefits of our plan participants. American's defined benefit plans are the best funded in the airline industry. Our plans have been managed prudently over the years, earning an average return of well over 10 percent. Moreover, we have a history of steadily contributing to our plans even in the years when cash was very short. In the last two years we have contributed over $599 million dollars to our plans.

We fear that in the midst of concern about the potential default of airline plans, Congress will take actions that would inadvertently cause our plans to become just as vulnerable as those currently in trouble. In particular, any legislation that would place greater funding burdens on companies with "below investment grade" credit ratings could have the perverse effect of forcing us to abandon our plans. We do not oppose setting different premium rates for companies with more risk reflected in their pension plans, but the measurement should be the strength of the plan, not the strength of the sponsor. We strongly oppose different funding rules based on a company's credit ratings.

With the help of Congress, we at American have a very realistic chance of returning to our historic status of fully funded defined benefit plans. We will submit a full statement for the record presenting in more detail our legislative and regulatory objectives.

Sincerely yours,

Captain Ralph Hunter
President
Allied Pilots Association

Tommie L. Hutto-Blake
President
Association of Professional Flight Attendants

James C. Little
International Executive Vice President
Director Air Transport Division
Transport Workers Union

Gerard J. Arpey
Chairman and CEO
American Airlines, Inc.

 

[Buck]

Just in case there are still people convinced that the Company is going to kill off our pensions.... here it is in writing:

[post="275926"][/post]​

How is the pension at AA funded? SEC or GAO?



Pension Loopholes Helped United Hide Troubles

By MARY WILLIAMS WALSH

Published: June 7, 2005

Loopholes in the federal pension law allowed United Airlines to treat its pension fund as solid for years, when in fact it was dangerously weakening, according to a new analysis by the agency that guarantees pensions. That analysis is scheduled to be presented at a Senate Finance Committee hearing today. A second report, by the comptroller general, found that most companies that operate pension funds are using the same loopholes. Those loopholes give companies ways - all perfectly legal - to make their pension plans look healthier than they really are, reducing the amount of money the companies must contribute. United's pension fund failure is now the biggest since the government began guaranteeing pensions 30 years ago. Most companies are able to keep their pension plans going, despite the chronic, hidden weakness, because they are generating enough cash to meet their obligations to current retirees. Only when a company files for bankruptcy, as United did in December 2002, and terminates its pension plan, as United has, does the government step in and make the plan's true economic condition apparent.
"We saw similar practices and events at Enron, but unfortunately, this time it's perfectly legal," said Senator Charles E. Grassley, the Iowa Republican who is chairman of the finance committee. He said he had scheduled today's hearing because he wanted to find ways to keep pension disasters like the $10 billion failure at United from happening at other companies. "The rules are full of serious holes that need to be fixed as soon as possible," Senator Grassley said. "No one should make the mistake that this is an airline-only problem. The reality is that companies everywhere have used the same arcane pension-funding rules" to shrink their contributions. Many analysts believe that the federal Pension Benefit Guaranty Corporation will one day require a bailout because it has been forced to pick up a number of large failed private pension plans. The more big defaults there are in the meantime, the more the eventual bailout will cost. The federal pension law was enacted in 1974 after a number of scandals in which companies went bankrupt and their workers discovered there was little or nothing set aside to pay the pensions they had been promised. The law was supposed to make pension failures a thing of the past by requiring companies to set aside money in advance - enough each year to pay the benefits the work force earned that year. The law also required that if a pension fund got into trouble, its sponsor was to quickly pump in more money, warn its employees about the problem and pay higher premiums to the federal pension insurance program. United did none of those things, even as its pension fund withered, because its calculations were making the fund look healthy. The fund is made up of four individual plans for various groups of employees. United's calculations followed the letter of the law until July 2004, when the airline announced that it owed $72.4 million to its pension fund but would not make the contribution. By that time, the company had filed for bankruptcy protection. The $72.4 million would have done little good by then, because the pension guaranty agency told the bankruptcy court that the pension fund had a shortfall of $8.3 billion. In its analysis, the Pension Benefit Guaranty Corporation found that in 2002, when United was determining how much it had to contribute to its four plans, it calculated that the plans for its pilots and its mechanics each had more money than needed. It further calculated that the plans for its flight attendants and its managerial workers were close to being fully funded, and did not need any special attention. On the basis of those calculations, United, a unit of the UAL Corporation, made no pension contributions that year. Those numbers are on file with the Labor Department. But they do not square with the pension numbers United provided to the Securities and Exchange Commission. That agency requires companies to calculate pension values in a different way. At United, that method showed the four pension plans to be only 50 percent funded; that is, they had only half as much money as they needed to make good on United's promises to its workers. Pension calculations done for S.E.C. filings have nothing to do with the rules for calculating contributions. But had United been required to use the S.E.C. pension numbers to determine its contribution that year, it would have had to pump money into the plans quickly. The pension law requires companies to make special catch-up contributions any time their pension funds fall below an 80 percent funded level, or even when they fall below 90 percent funded, if they stay at those levels for several years. A plan that was only 50 percent funded would be considered a real emergency. But the law allowed United to say its pension plans were fully funded, or nearly so, and, therefore, no more money was needed. United's employees were not informed that anything was amiss, as the law requires of badly weakened plans. Nor did United have to pay the higher premiums to the pension guaranty agency that the law expects. The discrepancy between a company's pension report to the S.E.C. and the Labor Department is but one example of the problems. At today's Senate hearing, David M. Walker, the comptroller general, is expected to testify that companies have so many ways of tweaking their pension calculations that they almost never have to make the special catch-up contributions that Congress required of plans that are slipping. A recent study by the Government Accountability Office, which Mr. Walker runs, examined eight years of records for the nation's 100 largest pension funds, and found that only six plans in the entire group ever had to pay the special contributions in that period.
For two of the plans, it was already too late by the time the special contributions came due. Years of insufficient contributions had taken their toll, and those plans collapsed and were taken over by the government. The G.A.O. study attributes some of the misleading pension math to the use of inappropriate actuarial assumptions in projections and some to a process called "smoothing," in which actuaries attempt to eliminate short-term volatility by spreading changes over several years. But the pension agency's analysis of United's case shows that the rules for tracking contributions made in prior years have also caused a great deal of trouble. The rules allow companies that put in more than the required minimum in any given year to keep the excess amount on their books and to use it to offset their required contributions in years when cash is tight. These excess contributions from the past are kept in a running tab called a credit balance. The trouble is that at United, as at many companies, money contributed in the 1990's was invested in assets that lost value during the bear market that began in 2000. But the pension rules allow companies not only to keep their pension credit balances on the books at the original amount, but they are even permitted to allow their credit balances to compound in value at some interest rate determined by the plan's actuary. When United's calculations finally began to show that contributions were quickly needed, in 2003, the airline was able to satisfy the requirement with just a small amount of cash and lots of bookkeeping entries from its credit balance. Senator Grassley said he believed many companies were "booking phony investment gains to hide that workers' pensions are going down the tubes." He said he hoped the hearing would lead to legislation that would eliminate the loopholes that made such maneuvers possible.
In a later session today, the finance committee is scheduled to hear from executives of some of the major airlines, and from the leaders of some of the unions for airline employees.

 

[FWAAA]

True, but the chronic whiners are gonna see this joint communication as futher evidence that their unions have abandoned them. In bed with the Company, they will cry. 😛

Here's to hoping that Congress gives a helping hand to companies that don't want to dump their pension obligations but instead want to fulfill its obligations to its workers.

 

[TIME FOR CHANGE]

but instead want to fulfill its obligations to its workers

What company do you work for I

If they gave a rats ass we wouldnt be in the position we are in.

You can bet all the big boys are taken care of bankruptcy or not. 😀

 

[Wretched Wrench]

This is comforting talk, but still talk. And, right now, the company is trying to convince congress to give them yet another reduction in the requirements to fund our pensions. Notice I said OUR pensions, not theirs. Remember, the top 47 officers of the company have a BK-proof retirement fund. We are not all in the same boat. When their pensions are at the same risk as ours, then I will believe they are trying to save our pensions, and I will believe the rest of what they say and follow their leadership. Otherwise, it is just talk.

There is such a thing as leading by example, good or bad.

 

[FWAAA]

This is comforting talk, but still talk. And, right now, the company is trying to convince congress to give them yet another reduction in the requirements to fund our pensions. Notice I said OUR pensions, not theirs. Remember, the top 47 officers of the company have a BK-proof retirement fund. We are not all in the same boat. When their pensions are at the same risk as ours, then I will believe they are trying to save our pensions, and I will believe the rest of what they say and follow their leadership. Otherwise, it is just talk.

There is such a thing as leading by example, good or bad.

[post="275937"][/post]​

Not quite.

No matter how many times you repeat such misinformation, it still doesn't become true.

The "BK-proof" retirement fund only places the executives' very large pensions on the same footing as yours.

The assets in your pension fund cannot be attached by creditors. Since the funding of the "BK-proof" executive pensions, neither can they.

Theirs are just larger than yours, that's all.

The timing of their funding sucked, and cost the CEO his job. But get over it already. They make more money than you, and their pensions are gonna be larger.

AMR contributed $328 million to the employees' pension plans in 2003, and also had the temerity to set aside $41 million to pay the large pensions of the executives. So what?

I get your position: Your pensions should be funded and exempt from creditors. But not the bosses' pensions. Sounds an awful lot like class envy wrapped up in the noble shroud of "fairness to workers." Might as well complain about the pilots' pensions while you're at it. :down:

 

[Hopeful]

Has anyone considered that the pension issue will become the ultimate concession-getting caveat?

If AA is serious about protecting the tradiational pension, then what will they be expecting in return to keep it?

 

[PRINCESS KIDAGAKASH]

If they claim they don't have the money now to fully fund our pension now,what makes you think they will have it 10-25 years down the road? Our pension is on the chopping block despite the B.S. of certain posters on this board. AA will use our pension as a bargaining chip in 2009,when our slavery contract becomes ammendable,to get more concessions!

Wait till Kirk Kerorkian gets to be the majority shareholder in General Motors. It has been reported that his main goal,when he has accomplished this, is to flush G.M.'s pension and retiree health care plans down the toilet using his choice of directors and CEO. If you think we have pension problems now, you ain't seen nothing yet!

 

[TonyB]

True, but the chronic whiners are gonna see this joint communication as futher evidence that their unions have abandoned them.  In bed with the Company, they will cry.    😛

Here's to hoping that Congress gives a helping hand to companies that don't want to dump their pension obligations but instead want to fulfill its obligations to its workers.   

[post="275929"][/post]​

:angry: :angry:
Just where is this money supposed to come from to give the companies a "helping hand?" The Government? Gee? I wonder where the Government gets its money? Could it be the tax payers?
So let me see if I get this straight. A company makes a promise to provide retirement to its workers after they have spent their life working for them. When the time comes to make good on that promise, they screw the worker out of that pension, while executives give themselves bonuses. Now the workers not only don't get a pension from the companies but have to, as tax payers, pay for it them themselves. How noble of congress! After al,l the politicians do know who butters their bread.
This reminds me of the Savings and Loan scam in which the "Government"
picked up the tab and most of the fat cats responsible did little or no time.
It is unbelieveable to me what the working class of this country puts up with. Corporations want to slash wages, pay no medical, welch on pensions, shut down plants and export jobs and we sit by worying about American Idol or the Michael Jackson trial or what ever distraction the government controlled media flashes in front of out TV screens.
Anyone who thinks American is going to do the right thing and honor its pension commitments is either drunk or is a fool. Let's see what negotiation ploy the company and its lap dog unions employ to save our pensions :down: :down:

 

[Wretched Wrench]

Not quite.

No matter how many times you repeat such misinformation, it still doesn't become true.

The "BK-proof" retirement fund only places the executives' very large pensions on the same footing as yours.

The assets in your pension fund cannot be attached by creditors. Since the funding of the "BK-proof" executive pensions, neither can they.

Theirs are just larger than yours, that's all.

The timing of their funding sucked, and cost the CEO his job. But get over it already. They make more money than you, and their pensions are gonna be larger.

AMR contributed $328 million to the employees' pension plans in 2003, and also had the temerity to set aside $41 million to pay the large pensions of the executives. So what?

I get your position: Your pensions should be funded and exempt from creditors. But not the bosses' pensions. Sounds an awful lot like class envy wrapped up in the noble shroud of "fairness to workers." Might as well complain about the pilots' pensions while you're at it. :down:

[post="275942"][/post]​

The usual Straw Man thing from FWAAA.

 

[FWAAA]

If they claim they don't have the money now to fully fund our pension now,what makes you think they will have it 10-25 years down the road?

[post="275974"][/post]​

The legislative relief just allows companies to stretch out the catch-up funding over a longer period of time. It's not a balloon payment schedule, just a 25 year amortization of the shortfalls.

Just where is this money supposed to come from to give the companies a "helping hand?" The Government? Gee? I wonder where the Government gets its money? Could it be the tax payers?

See above. The helping hand to which I referred was a longer repayment schedule. AA would like to avoid dumping its obligations on the government. I'd like to see AA honor its pensions without freezing them or dumping them on the PBGC, except maybe in the case of you and Princess. 😛

 

[TonyB]

The legislative relief just allows companies to stretch out the catch-up funding over a longer period of time.    It's not a balloon payment schedule, just a 25 year amortization of the shortfalls.

Just where is this money supposed to come from to give the companies a "helping hand?" The Government? Gee? I wonder where the Government gets its money? Could it be the tax payers?

See above. The helping hand to which I referred was a longer repayment schedule. AA would like to avoid dumping its obligations on the government. I'd like to see AA honor its pensions without freezing them or dumping them on the PBGC, except maybe in the case of you and Princess. 😛

[post="276046"][/post]​

:angry: :angry:
So now FWAAA, you know the intentions of American Airlines? Who are you, Arpey?!
You just go on being a company shill and see where it gets you. You may think they are taking care of you now (I hope its more than just an "atta boy" or some under the desk time) but wait until you out live your usefulness.
That is one thing that many of the sell outs of labor and the corporate lackeys(from the AFL-CIO to the local shop steward, to individuals like FWAAA) don't consider. Sure, they may be sitting back saying, "I got mine" after they deliver the working class into the hands of corporate America but Judas also got his thirty pieces of silver. Unfortunately for them they may not see it comming and are shocked that they are rewardded for all their servitude in such a calous manner. " But they promissed to take care of me"...Yeah, and I've told many a slut," I'll respect you in the morning" :down: :down:

 

[eolesen]

I gotta say I'm really disappointed in a lot of the responses....

Complain all you want to about any other aspect of your contract, your compensation and benefits, or whoever's initials are on your union card, but this is the one thing that AA appears to have gotten right.

And yet many of you are still complaining about it....

AA could very easily be supporting DL and NW's position, which is to allow pensions to be frozen without going thru bankruptcy.

They're not. So at least give AA credit for that much....

Princess claims that pensions will be on the negotiating table in 2009. The only way that will happen is if the membership thru the negotiating committees agree to it. There's no other way aside from bankruptcy to close a pension plan. And rightfully so.

Princess asks where the money will be coming from to keep funding the pensions. The same place it comes from today -- out of company revenue.

 

[Wretched Wrench]

AA could very easily be supporting DL and NW's position, which is to allow pensions to be frozen without going thru bankruptcy.

AA is lettting DL and NW do the hard work, and is just standing back waiting and watching. AA knows all about getting advantages using the threat of bankruptcy.

Princess claims that pensions will be on the negotiating table in 2009. The only way that will happen is if the membership thru the negotiating committees agree to it.

As far as the TWU goes, pensions will be on the table next year. Perhaps "chopping block" would be a more accurate description of the furniture involved.

 

[Wretched Wrench]

The good news is that converting to a defined contribution plan might not be all bad, depending on the company's contribution.

Once the money is in your account, it is difficult for the company to spend it and then say they are broke.

It is already in your account if and when the company goes bankrupt or is granted concessions by union leaders.

It is portable. You can take it with you when you leave the company or the whole airline industry.

Let's just hope that the rug is not pulled from under the older employees and retirees when it happens.