Who holds the retierment funds?

SMMustang

Newbie
Feb 20, 2003
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I''m sure this has be asked a thousand times, but who holds the annuity to a retirement once you retire. Is it the company that you retired from, or a separate holding company?
 

Hopeful

Veteran
Dec 21, 2002
5,998
347
euters
Judge: U.S. Air Can End Pension Plan
Sunday March 2, 1:35 am ET
By John Crawley


ALEXANDRIA, Va. (Reuters) - A federal judge ruled on Saturday night that US Airways Group Inc. (OTC BB:UAWGQ.OB - News) could terminate its pilots' pension plan, saying it was a disheartening option to help save the bankrupt carrier.
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Judge Stephen Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia cleared the way for the company to seek federal government approval of its proposal to replace the pension plan with a cheaper one.

The pension plan covers 3,600 active and 1,100 retired pilots, some of whom could lose up to 75 percent of their benefits under the proposal.

US Airways says it can no longer afford the pilots' retirement plan and wants to replace it with one that would offer $850 million over seven years. The carrier says resolving the $1.6 billion pension liability is the last major hurdle it faces in Chapter 11 reorganization.

The company has said resolving the pension question is also necessary to receive $200 million in emergency financing from its biggest investor, Retirement Systems of Alabama, and a $1 billion government-backed loan.

The union had said the company did not use accurate financial calculations or consider every alternative to ending the plan. Mitchell disagreed, saying the company took reasonable action in the face of severe financial distress.

"It is disheartening that I am called upon to make a ruling on this motion. Some pilots may get something close to what they would have gotten. Others will suffer a great deal," Mitchell said.

IMMEDIATE TALKS SOUGHT

"This is not a happy case. When it comes to distributions and outcome, pensioners will get more than any other creditors," said John Butler, the lead bankruptcy attorney for the airline.

The company hopes to emerge from bankruptcy protection by the end of the month.

Mitchell said the airline must still resolve questions about whether the pension change would violate the pilots' contract. The pilots contend that any change must be part of collective bargaining.

US Airways called for immediate negotiations with the Air Line Pilots Association (News - Websites) to address the contract dispute, which is the subject of a grievance hearing before the National Mediation Board on March 13.

"We regret the impact that the plan termination will have on our pilots but the ultimate goal must be to save this airline and the jobs of almost 35,000 dedicated employees," said David Siegel, US Airways president and chief executive officer. "We believe we can find a mutually achieved solution to implement a new pension plan."

Roy Freundlich, the pilots' union spokesman, said the labor group would explore all its legal options and alternatives under its contract with the airline.

"This is not over," he said.

Any new plan would only cover active pilots, while retirees would have to accept whatever level of benefits are approved by the Pension Benefit Guarantee Corp., the agency that oversees corporate pensions.
 
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SMMustang

Newbie
Feb 20, 2003
13
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Yes, I read this, I know that NWA is playing with their retirement funds too. I must be too naive, because I thought that each year the company had to put retirement funds into an independent, private holding company, and once those funds were in there, they covered the retirement needs. It was kind of like backing the dollar with gold until the 70s. Evidently it doesn't happen this way.

I am going to have to talk to my father-in-law who sells insurance to see if there is any type of policy that can underwrite individual retirements. Taking the example in the usatoday, the pilot was suppose to get $175,000/yr + cost of living. Let's say on the day he retired he insured his retirement with a company that guarenteed him a percentage of his retirement the percentage being based on the company's prospect for continuing payments (99% for IBM and say 50% for KMart)+ matching cost of living if the company provided, but never reducing the payment.
 

Guest
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On 3/2/2003 12:15:15 PM SMMustang wrote:

Yes, I read this, I know that NWA is playing with their retirement funds too. I must be too naive, because I thought that each year the company had to put retirement funds into an independent, private holding company, and once those funds were in there, they covered the retirement needs. It was kind of like backing the dollar with gold until the 70s. Evidently it doesn't happen this way.

I am going to have to talk to my father-in-law who sells insurance to see if there is any type of policy that can underwrite individual retirements. Taking the example in the usatoday, the pilot was suppose to get $175,000/yr + cost of living. Let's say on the day he retired he insured his retirement with a company that guarenteed him a percentage of his retirement the percentage being based on the company's prospect for continuing payments (99% for IBM and say 50% for KMart)+ matching cost of living if the company provided, but never reducing the payment.
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My my husband and I chose the annuity, we thought that's exactly what it was. An annuity. But it's not. It's kind of like that "Social Security Trust Fund" the politcians are always talking about. The truth is, there IS no "Social Security Trust Funds". That money is in the Federal general funds so there is no such "trust fund". Same goes for the so-called annuity that we have been receiving for 8 years since his retirement. We both thought it was "safe" because it WAS an annuity and the money would always be there. Joke's on us. From what I have read about the court decision, ALPA active now gets to negotiate but the retired pilots will come under that loverly umbrella of the PBGC. So far as I understand it at this moment, the retired pilots have no say in this negotiation and since their concern is at odds with the active pilots, the retired guys are simply SOL.
I think you are very wise to seek the councel of your father in law. Like it or not, companies are going to ditch every bennie they can and this is the start of it. Not only the airline industry but ALL companies will do this sooner or later, unionized, or not.
I wish I had enough time left in my life to do-over. But I don't. If you are younger, no matter how this thing with U turns out, even if to the benefit of the pilots, watch your back and take care of yourself! This is very clear handwriting on the wall for every person with a job.
 

Cory

Newbie
Jan 22, 2003
9
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If you're talking about the USAToday article on U pilots, as usual, they got it wrong. 99% of pilots will never see a $175,000 pension. At least for U, there is no COL provision. What they get on the day they retire, is what they get til they die. Many older retiree are living on $30,000 or less!
 

Guest
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On 3/2/2003 12:38:44 PM Cory wrote:

If you're talking about the USAToday article on U pilots, as usual, they got it wrong. 99% of pilots will never see a $175,000 pension. At least for U, there is no COL provision. What they get on the day they retire, is what they get til they die. Many older retiree are living on $30,000 or less!
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If you are addressing my post, I know that you are correct first hand. My husband's pension is certainly NOT 175K, but it will likely end up at 30K.
 
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SMMustang

Newbie
Feb 20, 2003
13
0
My mistake, I didn't mean to imply that 99% of the pilots were getting 175K, but...now this is a big jump and something that would be interesting, is to sell my retirement to a company that would insure it so that I would get 99% (or whatever % they'd underwrite) GUARENTEED reguardless of future of the company. The insurance company gets 100% of my retirement and they send me 99% of it and the 1% is premium. That is what I meant by the 99%. Now, if the company goes bust, I still get 99% of whatever I was suppose to get and the insurance company sucks it up with the premiums I've paid. Depending on the underwriting someone in the airline industry might only get 80-90% of their retirement, but would never have to worry about their former company going under. Just a thought.
 

RowUnderDCA

Veteran
Oct 6, 2002
2,123
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www.usaviation.com
Does anybody have a line on what the PBGC will do to pilots that retired years ago?

There's something that seems wrong about this. If current pensioners are creditors (like the judge implied on Saturday) then bankruptcy could treat them pretty harshly, sadly. But then the lump sum recipients wouldn't be creditors, because they've got paid. So bankruptcy court wouldn't touch them.

But I'm not sure that PBGC will pay the annuitants more than the maximum and might even try to get something back from the lump sum recipients.

So does it seem to anybody else that ALPA and the company are reaching back to retirees from YEARS ago to help finance the 'enhanced' defined contribution plan for current pilots?

So, if PBGC lets U and ALPA negotiate new cash to benefit the current pilots, how can they differentiate them from retirees?
 

RowUnderDCA

Veteran
Oct 6, 2002
2,123
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www.usaviation.com
Can ALPA negotiate with the company to further reduce benefits for everyone so that, along with the new cash, the pension doesn't need to be terminated to the PBGC? Or can be 'terminated' to the MEC?

If it can, then choosing not to, is to choose to shift the liabilities to the retireds (terminate the pension to PBGC without any recourse to improvement over the maximum other than legislation) and retain the benefits (new cash flow) to enhance the currents, right?

Respectfully, I'm likely to be missing something.
 

oldiebutgoody

Veteran
Aug 23, 2002
2,627
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www.usaviation.com
[blockquote]
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On 3/2/2003 8:08:03 PM RowUnderDCA wrote:


Does anybody have a line on what the PBGC will do to pilots that retired years ago?

There's something that seems wrong about this. If current pensioners are creditors (like the judge implied on Saturday) then bankruptcy could treat them pretty harshly, sadly. But then the lump sum recipients wouldn't be creditors, because they've got paid. So bankruptcy court wouldn't touch them.

But I'm not sure that PBGC will pay the annuitants more than the maximum and might even try to get something back from the lump sum recipients.

So does it seem to anybody else that ALPA and the company are reaching back to retirees from YEARS ago to help finance the 'enhanced' defined contribution plan for current pilots?

So, if PBGC lets U and ALPA negotiate new cash to benefit the current pilots, how can they differentiate them from retirees?
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I'm not sure that anybody understands the full meaning of all of this right now, but implying that ALPA did this so as to screw the retirees in some way is just ludicrous. I don't really know if anything can be done on their behalf by way of the RLA now, but I also don't know just what benefits they will be entitled to under the PBGC either. I don't know why, if the company knew about his obligation, that they didn't include it's funding in the ATSB loan request. Seems they had their eye on ditching this obligation all along. I'll bet once they figure out how to get it they'll go after all the other retirements as well. Maybe not immediately, but either at contract time or the next force majeur (which could be as close as the next change in terror alert level). It's not over yet for the retirees. We'll have to see whether the company will really negotiate or just threaten liquidation again.
 

mlt

Senior
Dec 2, 2002
291
0
www.usaviation.com
RowUnderDCA,
I believe I read in one of the wire articles posted on the board today that the retirees (should ALPA lose the arbitration) would fall under the guidelines of the PBGC. Additionally, I think the judge was quoted as saying it was a shame (or something to that effect). As I was not a supporter of Mr. Schofield and other executives losing their pensions, I feel the same toward the retired pilots. I hope when ALPA is negotiating that they remember the retirees are the people who negotiated the great work rules and benefits that all of us have enjoyed for years and take the opportunity to repay them. One of the greatest tragedies are the pilots who have retired this year or will soon be retiring could see the retirement that they worked for 30+ years evaporate without ever realizing a dime. Many of these new retirees are the same pilots who trained the current union leadership when they were new to the property. It will be interesting to see the character of ALPA's MEC.
 

mlt

Senior
Dec 2, 2002
291
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www.usaviation.com
F.P.
Check the PBGC guidelines. I believe you are paid within a maximum amount according to the year the plan terminates and the age of the recipient when they collect their first payment from the PBGC. I think in a previous post you stated your ex-husband had retired 8 years ago--assuming he is 68 years old his benefit would be in the neighborhood of 58K. However, whatever payment you start with there is never an increase for the remainder of the time you collect from the PBGC (no cost of living, etc.)Look on their website for the information or call them for specific information.
 

Guest
[blockquote]
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On 3/2/2003 8:53:02 PM RowUnderDCA wrote:

Can ALPA negotiate with the company to further reduce benefits for everyone so that, along with the new cash, the pension doesn't need to be terminated to the PBGC? Or can be 'terminated' to the MEC?

If it can, then choosing not to, is to choose to shift the liabilities to the retireds (terminate the pension to PBGC without any recourse to improvement over the maximum other than legislation) and retain the benefits (new cash flow) to enhance the currents, right?

Respectfully, I'm likely to be missing something.
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No, I don't think you are missing anyting. Call me crazy but I don't believe that ALPA will remember the retirees because they don't have to. Morally and ethically, they sure should. But don't hold your breath. Again, I apologize for the tone of my post but we were left out of the loop almost until the last minute and were lucky enough to have Tom Davis get the fabulous legal representation he did.
 

RowUnderDCA

Veteran
Oct 6, 2002
2,123
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[blockquote]
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On 3/2/2003 8:51:12 PM mlt wrote:

RowUnderDCA,
I believe I read in one of the wire articles posted on the board today that the retirees (should ALPA lose the arbitration) would fall under the guidelines of the PBGC. Additionally, I think the judge was quoted as saying it was a shame (or something to that effect). As I was not a supporter of Mr. Schofield and other executives losing their pensions, I feel the same toward the retired pilots. I hope when ALPA is negotiating that they remember the retirees are the people who negotiated the great work rules and benefits that all of us have enjoyed for years and take the opportunity to repay them. One of the greatest tragedies are the pilots who have retired this year or will soon be retiring could see the retirement that they worked for 30+ years evaporate without ever realizing a dime. Many of these new retirees are the same pilots who trained the current union leadership when they were new to the property. It will be interesting to see the character of ALPA's MEC.
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Yes, MLT, this is exactly my concern.

It's rough I know. Good luck to all.
 

mlt

Senior
Dec 2, 2002
291
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FP
If that is what you think that is fine,however I have the chart provided by ALPA in the spring and the PBGC pays retirees at age 70 up to a mzximum of 71K and change (according to the above guidelines).