Pilot Retirements Cause Pension Cash Crunch

[FWAAA]

Some very ominous news for pilots. Despite what WT wants everyone to believe, the odds that DL keeps its DB plans is probably zero.

Delta Pilot Lump Sum Payouts May Be at Risk

Wednesday September 21, 12:14 pm ET
By Harry R. Weber, AP Business Writer

Delta Air Lines Pilot Exodus Continues, Lump Sum Payouts May Be in Jeopardy

ATLANTA (AP) -- A continuing exodus of Delta Air Lines Inc. pilots has drained the pension plan to the point where future lump sum payouts to retirees by the bankrupt carrier may be in jeopardy, according to the union.

The chairman of the pilot union's executive committee, John Malone, said in a letter to members Tuesday night there is a significant likelihood that lump sum payments will not be immediately available to pilots who are considering retirement on or after Oct. 1.

Part of the reason, Malone said, is the high number of pilots who have retired, many of them early, over the last 21 months. There were 202 pilots who retired Sept. 1, two weeks before Delta's bankruptcy filing, and more that 2,300 have put in their papers since January 2003, Malone said.

The normal pilot retirement age at Delta is 60. Senior pilots with enough years in can retire early at age 50. Delta pilots who retire can elect to receive half their pension benefits in a lump sum and the other half as an annuity later. It's unclear what the value of the annuity would be under any future bankruptcy plan.

Malone said management has informed the union that the lump sums due to pilots who retired Sept. 1 will create a cash shortfall for the pension plan, forcing the company to make up for it with a special contribution to the plan.

If the company doesn't make that contribution -- its recent statements suggest it won't -- the plan would be prohibited from doling out future lump sum payments until the shortfall is erased.

http://biz.yahoo.com/ap/050921/delta_bankruptcy.html?.v=4

 

[WorldTraveler]

Actually, this increases the odds that the pension plans can be saved. Pilot lump sum payments were a huge drain on the plans. The PBGC offers no lump sum option because they aren't interested in forking over huge amounts of money now when we all know it's alot easier to stretch out one's obligations. Same principle applies here.

Also, because pilots will get nothing in advance they will have a much greater interest in seeing them kept for the long haul. Those 202 pilots who retired in Sept. probably would not have left if they knew they couldn't get the lump sum.

So now, DL pilots are faced with the same prospect all other DL employees face - stay and work for far less or leave whatever has been earned at Delta behind and start over some place else. The latter is alot closer to the way most people in the world live and think.

 

[FWAAA]

Maybe you're right, WorldTraveler, but my take on it is that DL doesn't plan to make the catch-up contributions caused by the mass exodus of pilots and that will just make the plans that much more underfunded.

Perhaps the Congress will enact some DB-friendly rules allowing DL (and others) to stretch out the make-up of underfunded amounts to 25 years, but if not, DL simply lacks the money.

BTW, the pilots who retired Sept 1 will get their lump sum, but that others retiring later will likely not.

 

[pitguy]

They will not be allowed to stretch out these payments. You will see these pensions moved to the PBGC and paid out at a far less value. You will see Delta pilots working for far less money than they were and they are stuck since there are few other opportunities for them as a whole. It is sad, but this is what you get when you vote these Republicans in office (Not that the Democrats are any better).

-How is that working out for you?

 

[dc3fanatic]

It is sad, but this is what you get when you vote these Republicans in office (Not that the Democrats are any better).

-How is that working out for you?

[post="303591"][/post]​

AND if you voted the democrats in, a few airlines would have liquidated and maybe even more people would have been displaced.

should've, would've, could've . . .

 

[Royal Ambassador]

AND if you voted the democrats in, a few airlines would have liquidated and maybe even more people would have been displaced.

nothing is ever the republican majority's fault is it?

 

[kiloromeo]

What will happen is the judge will let the company not make payments to the pension... after a few missed payments the pension eventuall meets the requirements for a distressed pension.. then they ask the judge if they can hand it over to the PBGC...the PBGC will complain but they can't refuse it..

 

[WorldTraveler]

Since Delta just announced that they are freezing the pension plans, an involuntary termination is much less likely. While the pensions are still underfunded, no additional benefits will accrue.