Pension underfunding...how did it occur

C

chipmunn

Guest
US Airways provides ALPA, AFA, the IAM and some other employees defined benefit retirement plans. The CWA and FSA have frozen defined benefit plans as well as a defined contribution plan.
Pension plans have fund managers who make conservative investments, primarily in the bond market, some in the stock market, and occasionally like RSA in a more risky adventure like US Airways.
During the past three years the economy and stock market has retraced into a strong bear market. In response the Federal Reserve has cut interest rates to stimulate business, lower credit card rates, lowered mortgage interest, etc. However, as rates drop bond prices increase and the yield goes down. When the yield goes down there is less interest income for debt investments (bonds) and thus pension plans become underfunded.
Pension plan laws covered by ERISA never expected to have such a sustained bear market and thus 325 out of 360 company''s in the S&P 500 will have underfunded pension plans. When a plan becomes underfunded the law states that companies must refund their pension plans; however, in the case of most airlines and in our case US Airways they do not have the financial resources to restore the plans to 100 percent funding.
In the case of US Airways and UAL the problem is more compounded because these monies have to be accounted for in the 7 percent profit margin over the life of the federal loan guarantee program. Because the loan guarantee guidelines require US Airways to post the 7 percent profit margin, the bankruptcy Plan of Reorganization (POR)/ business plan must account for the pension plan restoration funding. The company believes with current market trends it will cost the airline $3.1 billion in restoration funding over the next six years, the remaining life of the loan guarantee to fully fund the defined benefit pensions.
US Airways reached agreement with the IAM and AFA and the union leadership recommended the TA''s be ratified the company would not change their pension plan, which account for about 24 percent of the company''s obligation. However, because the pilot pension plan is about 70 percent of the corporate obligation the company and ALPA agreed to change the multiplier from 2.4 percent to 1.8 percent and make some other changes.
This agreement was submitted to the PBGC last week, but the PBGC rejected the agreement. Today the company, ALPA, PBGC, Senator Specter, and senior members of the Bush Administration are meeting at the White House to discuss this issue to find a solution to the problem, which is no fault of US Airways, but the underfunding has been created primarily by the rise in bond market and the deep drop in interest rates.
Chip
 

mlt

Senior
Dec 2, 2002
291
0
www.usaviation.com
[STRONG]PENSION FUNDING CRISIS-PART 2[BR][BR][/STRONG]Additionally, ERISA requires funding deposits to be 3 times the previous 12 months disbursements. Due to the exorbitant pay raises pilots received ( elevating final average earnings) and projected pilot retirements the pilot deposit funding has skyrocketed to the tune of 2.3 billion dollars.
 

mlt

Senior
Dec 2, 2002
291
0
www.usaviation.com
Cavalier,[BR]I agree with you that the company created the problem. Additionally, I do not want to see anyone to lose. However, this is an issue between ALPA & management. The other labor groups on the property should not be required to fund ALPA's pension. Additionally, as long as Chip elects to post half-truths I will continue to counter.
 

cavalier

Veteran
Aug 28, 2002
2,409
1
www.usaviation.com
[P][SPAN class=BodyFont][STRONG]PENSION FUNDING CRISIS-PART 2[BR][BR][/STRONG]Additionally, ERISA requires funding deposits to be 3 times the previous 12 months disbursements. Due to the exorbitant pay raises pilots received ( elevating final average earnings) and projected pilot retirements the pilot deposit funding has skyrocketed to the tune of 2.3 billion dollars. [BR][BR][/P]
[P]mlt[BR]--------------------------------------------------------------------------------------------[BR][BR] PFC Part-3[BR][BR] I just wish I had the problem of being on the receiving end of exorbitant, that would put me in a better position when the roof caves in. Show me a sane man who would refuse such a thing. The company agreed to those terms, the company created this problem, not the pilots.[/P][/SPAN]
 

cavalier

Veteran
Aug 28, 2002
2,409
1
www.usaviation.com
[P][SPAN class=BodyFont][STRONG][EM]Would Chapter 7 eliminate the pension of these airline working dogs?[/EM][/STRONG][BR][BR]-------------------------------------------------------------------------------------[BR][BR] No, it would lower them as much as 40%...just ask MRS DOLE! [/P][/SPAN]
 

cavalier

Veteran
Aug 28, 2002
2,409
1
www.usaviation.com
Additionally, as long as Chip elects to post half-truths I will continue to counter.[BR][BR]------------------------------------------------------------------------------------------------------[BR][BR] Great, and I thank you for providing another source of light to the dim corners.
 

Biffeman

Senior
Nov 25, 2002
447
0
www.usaviation.com
Chip is the master of posting his "facts", he can't even accept when he is wrong, his article for the charlotte disturber was full of mistruths. Chip posts the world according to Chip and whatever Dave tells him to post. [BR][BR]In reality he is scared he will lose his six figure income and his million dollar pension. That is why ALPA is always the first to cave into management's demands.
 
OP
C

chipmunn

Guest
Cav:

Cav said: I just wish I had the problem of being on the receiving end of exorbitant, that would put me in a better position when the roof caves in. Show me a sane man who would refuse such a thing. The company agreed to those terms, the company created this problem, not the pilots.

Chip comments: Cav, you're correct. The problem MLT referred to was due to the parity plus one concept, which all work groups rejected in principle, but due to leverage the UA pilots negotiating a 41.5 to 49 percent pay raise, using their endorsement of the US merger as their hammer. In addition, this gave other UA work groups leverage to obtain large pay raises and the UA AFA the encouragement to file a law suit, over merging the US wholly owned airlines into US (which later became a grievance victory) that was the final nail in the merger coffin, even though a deal had been brokered by Senator Specter at the Justice Department on July 23, 2002, where Jim Goodwin agreed to complete the merger. As a side note, it's funny how things end up in this industry, but US employees are much better off today without that deal being completed.

MLT:

I post information to the best of my knowledge; however, I have never purposely posted half truths. If I make a mistake that's o.k., because that means there is better information for people to benefit from.

In my opinion, stating somebody posts have truths is calling them a liar. If you are going to do so, with all due respect, I challenge you to honestly identify yourself instead of being a coward and hiding behind a computer screen. However, I doubt you have the courage to identify yourself, do you?

In regard to US pilot pay raises and concessions, pilot pay raises were a function of large raises granted at UA, DL, & AA, due to the parity plus one concept forced on all US labor groups. However, in the US restructuring and "socialized" reductions, the pilots who represent 10 percent of the employees and 30 percent of the labor expense, took 60 percent of the cuts. Now in round two the pilots will take 50 percent of the cuts and will be the only employee group to see retirement reductions. Management, the IAM, and your work group, the AFA, will see no pension cuts if there TA's are ratified, unless the PBGC elects to "distress terminate" your plan.

When is enough MLT? Should the pilots take 60, 70, 80, or 90 percent cuts, so you and the rest of your colleagues do not have to take additional cuts? After all, I bet you believe we should have non-pilot mainline work groups make more than MDA pilots because the other non-pilot mainline jobs are more important, right MLT!

Regardless, since you have questioned my integrity do you have the "courage" to publicly identify yourself?

Chip
 

mlt

Senior
Dec 2, 2002
291
0
www.usaviation.com
Good Morning Chip,[BR]Let me start first by offering an apology. I guess half-truths is a very strong term and in essence I guess I did imply you were lying. I'm uncertain whether your passion to see US survive sometimes clouds your perception or if your 'reliable sources' are only giving you a portion of the situation. My perception of the 'fear-based' posts is an attempt to sway votes without acknowledging the full scenario. Is this a frightening time? Absolutely. Will people be financially/emotionally hurt if US liquidates? Absolutely. My issue is I want the concessions and voting to be done fairly and honestly. When Mr. Siegel elected to hire a known union buster onto the property, everything management says and does is subject to suspicion. Please realize I want US to survive. I apologize if my perception of your posts is wrong.[BR][BR]I do not have a clue why you brought up MDA pilot salaries as I have never posted anything on this subject.[BR][BR]As far as the concessions pilots have been required to contribute...It sickens me, and believe me I find no pleasure. However, it is my perception that this issue belongs to ALPA and the other groups should not be required to bail-out your pension fund.[BR][BR]Will I reveal my identity? My 'reliable sources' have suggested it is not in my best interest. Therefore, I elect to remain anonymous for the time being (as Mr. Siegel and Jerry Glass elect to post anonymously).[BR] [BR]Sincerely,
 

diogenes

Veteran
Aug 22, 2002
2,515
0
Chip doesn't go far enough describing the revenue fall off in the DBRP's. During the stock market run-up, many companies made no contributions out of operating funds to the plans; they made the contributions out of the profits of the plan itself. Perfectly legal, but unwise, as current events show. The market does not go up forever, and companies that utilized this stragey set themselves up for shortfalls in the plan. I guarantee they were NOT this speculative with their golden parachutes.

Chip, you need to get off the 'reveal yourself' kick. It doesn't take a lot of courage to post your name when the company has immunized you. Those of us without a license to print must act prudently. I can assure you the company would retaliate against many on this board. The fact U has not dealt with you in this matter speaks volumes more than anything you can say.

Now to a reality check. I think we all know the haircut ALPA will take if U liquidates. A massive pension hit (goodbye million dollar lump sum or 100,000 annually, and I got that straight from two different active U pilots)and goodbye the opportunity to make $100,000 to $200,000 annually (I know f/o's make less, but f/o's eventually become senior captains). Guys, I don't wish this on you. I understand you'd approve of most any deal that keeps the merry-go-round turning, even if it throws me under the bus.

Here's what YOU need to understand. The deal they're offering me starts me out at $8 an hour, no pension, and no union representation. The deal they're offering me does not hold out the hope many of us will ever work our way back to mainline. Under those circumstances, I will not vote to accecpt such terms, regardless of ALPA's situation - I have to do what's right for me. Don't even ask me to take one for the team; it is well demonstrated here at U it's every man for himself, and the devil take the hindermost.

The charge of class envy has been laid on this board, and I want to respond to that. I can't tell you how many pilots, over my entire 21 year career, have told me my work group, or the mech, or the f/a's, are overpaid. This not withstanding each of those groups were at or below the industry average. Obviously, begrudging another his wages is a two way street here at U.
 

Biffeman

Senior
Nov 25, 2002
447
0
www.usaviation.com
Chip Dave stated in the roadshows that you are more like 50-60% of labor costs, you make the most, therefore you get more concessions. You can hire two to four mechanics for one pilot. And you also forget that most employees work a 40 hour work week, that is work hours with two days off, not three and four day trips and have three and four days off everyweek.[BR][BR]And Chip for you complaining about MDA's salary blame your negotiating committee and your MEC not other union members or other work groups. Your own group sold you out. (MDA wage rates) Top out fleet service agent is $14 an hour for a grand total of gross annual earning of $29,120. Now I doubt an MDA pilot will earn less then that.[BR][BR]A customer service agent will earn $13.50 an hour for a grand total of gross annual wages of $28,080, I doubt an MDA pilot will earn less then that.[BR][BR]Mechanic and Related have not come to an agreement in regards to MDA yet.[BR][BR]And when an RJ flown by anyother commuter the CSA, FSA and mechanic and related don't work those flights, but you get one furloughed pilot back flying and contract workers handle the ground since they are not US Airways mainline flights.[BR][BR]Chip post all the facts.
 

Biffeman

Senior
Nov 25, 2002
447
0
www.usaviation.com
Diogenes, I could not have said it better myself.[BR]Someone on this board is nothing more then Dave's mouthpiece and uses threats and scare tactics to sway votes. This person has to realize some people finally have said enough is enough.[BR][BR]If the colonists had this person's attitude we still be under the rule of the british empire.
 

delldude

Veteran
Oct 29, 2002
28,211
5,879
Downrange
www.youtube.com
[P]
[BLOCKQUOTE][BR]----------------[BR]On 12/28/2002 7:59:44 AM Biffeman wrote:
[P]Chip Dave stated in the roadshows that you are more like 50-60% of labor costs, you make the most, therefore you get more concessions. You can hire two to four mechanics for one pilot.[STRONG][EM]i knew we could do their job,dust off the 'ol flight sim 2002...i'm commin davey![/EM][/STRONG] And you also forget that most employees work a 40 hour work week, that is work hours with two days off, not three and four day trips and have three and four days off everyweek.[BR][BR] Chip post all the facts.[/P]----------------[/BLOCKQUOTE]
[P][/P]
 
OP
C

chipmunn

Guest
MLT:

Apology accepted. It takes courage to admit when one makes a mistake and a greater person to apologize.

I believe you, I, and every other person who posts on this message board wants US Airways to survive and prosper. We have all taken a huge haircut and it sickens me as well, but I believe in today's dismal economic times the second round of concessions are better than no job at all.

Dea Certe made a very valid point in that it's better to obtain severance pay or have a job while we're out searching for another position. Nobody knows for sure if the company will liquidate per the RSA threat, but it appears all of the labor leaders agree it's enough of a threat to put the company's last offer out for a vote.

Regardless, I appreciate your last post and comments.

Chip