Pilot Pension Proposal from AA

[TWU informer]

AA Pilot Pension Proposal

How would you like to take a "B" Plan distribution at age 60 and still keep working to 65?

Wow

 

[jimntx]

The better question...Would you like to have a Plan B?

 

[OldBubba]

The better question...Would you like to have a Plan B?

Had a TWA B plan and it was ROBBED by guess who!!!!!!

 

[eolesen]

AA Pilot Pension Proposal

How would you like to take a "B" Plan distribution at age 60 and still keep working to 65?

Wow

It's not exactly revolutionary, Dave.

The IRS allows anyone to take a 401K distribution (full or partial) at age 59 1/2 without any penalty regardless if they're still employed. The question is whether or not the plan allows it. Some do, some only allow distributions after separation. I don't have any money left in the AMR 401K plan, so I have no idea.

 

[Buck]

It's not exactly revolutionary, Dave.

The IRS allows anyone to take a 401K distribution (full or partial) at age 59 1/2 without any penalty regardless if they're still employed. The question is whether or not the plan allows it. Some do, some only allow distributions after separation. I don't have any money left in the AMR 401K plan, so I have no idea.

Good point. However it is revolutionary for the TWU even to have seen or conceive the idea.

Remember, there are three union labor divisions at AMR, The Pilots, The Flight Attendants and the TWU.

The TWU is an industrial catch all entity. Let us see how close the mechanic T/A is compared to the Fleet Service around the 17th of November. Compensation my vary, but other benefits will mirror the other work groups under the TWU umbrella. What effects one groups pension or pre-funding will effect the other.

 

[TWU informer]

It's not exactly revolutionary, Dave.

The IRS allows anyone to take a 401K distribution (full or partial) at age 59 1/2 without any penalty regardless if they're still employed. The question is whether or not the plan allows it. Some do, some only allow distributions after separation. I don't have any money left in the AMR 401K plan, so I have no idea.

I am not sure if you are trolling or just trying to hoodwink us here, but the APA Pilot "B" Plan is a lump sum payment variable income non-qualified pension plan that has NOTHING to do with a 401(k) plan as you are claiming. The "B" plan is a fund to get around the 401(a)(17) limits and supplements the Pilot Retirement with a healthy LUMP SUM payment upon retirement beyond those limits. The current company proposal allows them to take the distribution at age 60 and keep working. My understanding is that this distribution could easily exceed $1 million for many AA Pilots.


B.
Variable Income Non-Qualified Pension Plan
1.
The Company shall establish and maintain a non-qualified pension plan to
restore the amount of any benefit reduction required as a result of the Section
401(a)(17) Limits thereunder to any benefit provided under the American
Airlines, Inc. Pilot Retirement Benefit Program -- Variable Income Plan (the "B
Plan"). This non-qualified plan shall be a "top-hat" plan. This non-qualified
plan shall be retroactively applied to any pilot whose benefit has been reduced
because of the Section 401(a)(17) Limits.
2.
Subject to the provisions of B.10. and the opt-out provision of B. 12. below,
each plan participant shall have an account expressed in units under this non-
qualified plan based on 11% of the individual’s compensation that exceeds the
Section 401(a)(17) Limits. Such account shall be established and maintained
in the same manner as an account under the B Plan, including, but not limited
to, the unitization of contributions, the annual 6% increase in prior year units,
etc. Notwithstanding the foregoing, nothing herein is designed to correct any
reduction in the amount of benefit that a participant would receive under the B
Plan because of the operation of section 415 of the Code.
3.
Benefits shall be payable under this non-qualified plan as a lump-sum only and
shall be computed in the same manner and using the same procedure as for a
lump-sum distribution under the B Plan.
4.
Benefits under this non-qualified plan shall be payable at the same time and for
the same reasons as benefits payable under the B Plan.
5.
Benefits under this non-qualified plan shall be paid from the general assets of
the Company, or its successor.
6.
The Company shall pay the employer portion of any federal payroll taxes
attributable to payments from the non-qualified plan. Individual pilots shall be
responsible for the employee portion of any taxes. The Company will withhold
taxes from the plan distributions if the pilot so elects and federal law so
permits.
7.
The Association shall have the right to audit, at its own expense, the operation
of the plan. The Company shall make available during its business hours to the
Association and its auditors, accountants, or other agents and professionals all
books, records, and reports that are necessary to verify that this non-qualified
plan is operated in accordance with its terms.
8.
The Company shall prepare the plan document for this non-qualified plan
subject to review and final approval by the Association. The Company shall
distribute the plan document to all pilots who participate in the plan in the same
manner as it does the A Plan.
9.
The Company shall provide each participant with an annual statement of his or
her accrued benefit under the non-qualified plan at the same time and in the
same manner as under the B Plan. Benefit statements shall be prepared and
the amount of benefit shall be reported to the participant as if the participant
had actual B Plan units. Unit value and the growth in number of units in this
non-qualified plan will be determined under the B Plan.
10. If ( A ) there is a change in law or regulations that makes it clear that this non-
qualified plan is not a top-hat plan, ( B ) there is a change in law or regulations
that would require the plan to be funded, or ( C ) the IRS, the DOL, a court, or
another federal agency concludes that the plan is not a top-hat plan or must
otherwise be funded, then as to benefits accrued up to that time, the Company
shall attempt to design and restructure the plan so as to avoid constructive
receipt problems for individual pilots, to reduce its funding obligation, or to
make its contributions to the plan deductible. The Company will promptly notify
the Association if one of these events occurs. The Company will consult with
the Association about any such plan amendment or redesign prior to
implementation and will use its best efforts to accommodate any concerns
expressed by the Association concerning the plan amendment or redesign.
Because the law or regulations may change in the future, the parties cannot
implement a plan design today that would reduce the likelihood that the plan
would have to be funded or that would insure deductibility of any contributions
made under the plan in the future. Without regard to future changes in the law
or regulations, examples of plan designs that could be structured today to
avoid constructive receipt problems, to reduce funding obligations, or to make
contributions deductible would be a profit sharing plan where a one-time
contribution is made at retirement that is equal to the lump sum payable from
the non-qualified plan.
11. The Company does not intend to continue the plan if the plan is determined not
to be a top-hat plan or subject to funding requirements as discussed in B. 10.
above. At this point, the Company intends to discontinue the plan for the
purpose of distributing benefits accrued to date. If accruals under the plan
cease because of this provision, each pilot shall be given a cash payment
equal to the amount that the Company would have contributed to the B Plan if
it was not subject to the Section 401(a)(17) Limits.
12. In lieu of accruing a benefit under this non-qualified plan, each pilot shall be
given an annual option to elect to receive a cash payment equal to the amount
that the Company would have contributed to the B Plan if it was not subject to
the Section 401(a)(17) Limits. Such election shall be given annually in the time
and manner as prescribed by any applicable law to avoid constructive receipt
of the funds.
13. Any language agreed upon by the Company and the Association affecting the
amendment, suspension, or termination process of the B Plan shall also apply
to this non-qualified plan except as otherwise provided in B. 10. and B. 11.
above.
Very truly yours,
/signed/
Jane G. Allen
Vice President
Employee Relations
Agreed:
/signed/
James G. Sovich
President
Allied Pilots Association
Supplement F - 16

 

[TWU informer]

(a) Compensation limit requirement --
(1) In general.
In order to be a qualified plan, a plan must satisfy section 401(a)(17). Section 401(a)(17) provides an annual compensation limit for each employee under a qualified plan. This limit applies to a qualified plan in two ways. First, a plan may not base allocations, in the case of a defined contribution plan, or benefit accruals, in the case of a defined benefit plan, on compensation in excess of the annual compensation limit. Second, the amount of an employee's annual compensation that may be taken into account in applying certain specified nondiscrimination rules under the Internal Revenue Code is subject to the annual compensation limit. These two limitations are set forth in paragraphs ( B ) and ( c ) of this section, respectively. Paragraph (d) of this section provides the effective dates of section 401(a)(17), the amendments made by section 13212 of the Omnibus Budget Reconciliation Act of 1993 (OBRA '93), and this section. Paragraph (e) of this section provides rules for determining post- effective-date accrued benefits under the fresh-start rules.

(2) Annual compensation limit for plan years beginning before January 1, 1994.
For purposes of this section, for plan years beginning prior to the OBRA '93 effective date, annual compensation limit means $200,000, adjusted as provided by the Commissioner. The amount of the annual compensation limit is adjusted at the same time and in the same manner as under section 415(d). The base period for the annual adjustment is the calendar quarter ending December 31, 1988, and the first adjustment is effective on January 1, 1990. Any increase in the annual compensation limit is effective as of January 1 of a calendar year and applies to any plan year beginning in that calendar year. In any plan year beginning prior to the OBRA '93 effective date, if compensation for any plan year beginning prior to the statutory effective date is used for determining allocations or benefit accruals, or when applying any nondiscrimination rule, then the annual compensation limit for the first plan year beginning on or after the statutory effective date (generally $200,000) must be applied to compensation for that prior plan year.

(3) Annual compensation limit for plan years beginning on or after January 1, 1994 --
(i) In general.
For purposes of this section, for plan years beginning on or after the OBRA '93 effective date, annual compensation limit means $150,000, adjusted as provided by the Commissioner. The adjusted dollar amount of the annual compensation limit is determined by adjusting the $150,000 amount for changes in the cost of living as provided in paragraph (a)(3)(ii) of this section and rounding this adjusted dollar amount as provided in paragraph (a)(3)(iii) of this section. Any increase in the annual compensation limit is effective as of January 1 of a calendar year and applies to any plan year beginning in that calendar year. For example, if a plan has a plan year beginning July 1, 1994, and ending June 30, 1995, the annual compensation limit in effect on January 1, 1994 ($150,000), applies to the plan for the entire plan year.

(ii) Cost of living adjustment.
The $150,000 amount is adjusted for changes in the cost of living by the Commissioner at the same time and in the same manner as under section 415(d). The base period for the annual adjustment is the calendar quarter ending December 31, 1993.

(iii) Rounding of adjusted compensation limit.
After the $150,000, adjusted in accordance with paragraph (a)(3)(ii) of this section, exceeds the annual compensation limit for the prior calendar year by $10,000 or more, the annual compensation limit will be increased by the amount of such excess, rounded down to the next lowest multiple of $10,000.

(4) Additional guidance.
The Commissioner may, in revenue rulings and procedures, notices, and other guidance, published in the Internal Revenue Bulletin (see section 601.601(d)(2)(ii)( B ) of this chapter), provide any additional guidance that may be necessary or appropriate concerning the annual limits on compensation under section 401(a)(17).

 

[TWU informer]

Must be nice to make so much money that you exceed Government compensation limits.

Must be even nicer to negotiate a plan that supplements to get around those limits.

And now, to be able take a massive LUMP SUM payment from the supplement before retirement and still make compensation for 5 more years that exceeds the limits.

I doubt anyone with these items would spend much time complaining about Executive Bonus Awards.

 

[FWAAA]

I am not sure if you are trolling or just trying to hoodwink us here, but the APA Pilot "B" Plan is a lump sum payment variable income non-qualified pension plan that has NOTHING to do with a 401(k) plan as you are claiming.

No, eolesen is completely correct. You're mis-reading the documents you cut and pasted. The B Plan is a 401(k) type of plan. It is called the "American Airlines, Inc. Pilot Retirement Benefit Program -- Variable Income Plan (the "B Plan")."

On top of the qualified B Plan, AA also agrees to maintain yet another plan called the "Variable Income Non-Qualified Pension Plan" that is fully described in the letter from Jane Allen in Supp F-16. It is the non-qualified top-hat plan that will receive any contributions that exceed the 401(a)(17) limits.

The "B" plan is a fund to get around the 401(a)(17) limits and supplements the Pilot Retirement with a healthy LUMP SUM payment upon retirement beyond those limits. The current company proposal allows them to take the distribution at age 60 and keep working. My understanding is that this distribution could easily exceed $1 million for many AA Pilots.

To repeat, NO, the B Plan is not a fund designed to evade the limits of 401(a)(17). It does provide a healthy lump sum just like any other 401(k) plan. And this may come as a shock, but it's not at all unusual for people to have $1 million or more in their 401(k) plans. People who maxed out their contributions throughout the 1980s, 1990s and the most recent decade often have $2 million or more if they chose aggressive growth funds or small cap funds or if they self-directed and bought stocks like MSFT or Dell early on. AA does provide yet another plan that is described in the document you cut and pasted - a nonqualified top hat plan that is a workaround to the funding and comp limits.

Looks like you had an Emily Litella moment.