what happened to northwest airlines pension

Lets say an airline could predict a few lean years ahead and it wanted to put extra money into its pension fund to protect its employees. Benefits & Features Circuit Court of Appeals assesses five factors when deciding whether an Employee Retirement Income Security Act (ERISA) administrator interpreted a plan reasonably: (1) whether the interpretation was consistent with the goals of the plan, (2) whether the interpretation renders any language of the plan meaningless or internally inconsistent, (3) whether the interpretation conflicts with the substantive and procedural requirements of ERISA, (4) whether the words at issue were interpreted consistently, and (5) whether the interpretation is contrary to the clear language of the plan. Hundreds retired early to take advantage of the clause before it was stopped after Delta's Chapter 11 filing. In its motion for a protective order against the Labor Department's subpoena, Northwest is arguing that the demand is "extremely broad" and that full cooperation could "threaten or undermine" its ability to reorganize in bankruptcy. Types of QDROs All rights reserved. It can cost businesses between $75,000 to $150,000 to dismantle a plane like the 747. A company could avoid this with higher levels of over-funding in good years. For an additional 3,000-plus in between, pension cuts range from a few percent to almost 100 percent. You're spreading the payments out over time," says McClain. Northwest Airlines, Inc. Group Medical Plan from Delta Airlines. Adding to the pain of the pension cuts, Delta last week reached agreements with court-appointed retiree creditor groups that will significantly boost almost all retirees' health insurance premiums, pilot and nonpilot alike. The pension bill is now being completed in a House-Senate conference committee. Jason Depew flies as a captain for a major U.S. airline. Uncle Sam allows over-funding to some degree. "The only ones that are getting their pensions dumped are the retired pilots.". Citing a provision of the plan that requires Delta to offset pensions by the amount of other income-replacement benefits, Delta has reduced each plaintiffs monthly pension by an amount calculated in his workers compensation settlement agreement. Last fall, after the $10 billion collapse of the pension fund at United Airlines, the Labor Department agreed to coordinate with the I.R.S. A traditional pension plan pays retirees the same amount every month, no matter what the market is doing. Although some may still be displeased with the Northwest Airlines brand no longer being around, the eventual fate of both Delta and Northwest turned out much better than many had ever envisioned with both companies in bankruptcy protection. As a subscriber, you have 10 gift articles to give each month. PBGC Services asking him why the very basic Plan information was not included in the It is usually a requirement of the Plan that the amount awarded to the Alternate Payee be expressed in terms of a monthly benefit payable for either the lifetime of the Participant or the Alternate Payee. investment gains (loses) and Plan contributions from Delta, Plan assets at the FedEx never filed for bankruptcy, but its current defined benefit plan has limitations that have capped benefits well below pilots' final earnings level, Mr. Dyer said. Eagan, MN 55121-1534. Copyright 2023 Flying Media. An official website of the United States government. In the motion, Northwest said it was "willing to cooperate fully" with the Labor Department but not unless the government gave it more forceful guarantees that confidential financial information would be kept private and not used "as leverage to pressure" it. However, by the turn of the millennium, Northwest faced new challenges that forced it to file for bankruptcy protection in 2005. Under this reading, any settlement for a workers compensation claim would be periodic, making the phrase periodic benefits payable identical to benefits payable and rendering the word periodic meaningless. The U.S. government relies on our tax dollars to exist, and hes very picky about what exemptions and deductions he allows. Leading up to Northwests bankruptcy filing were numerous challenges that severely hampered the airlines profitability. Contribution from Delta Airlines was $77,621,712. Airline Pensions All But Gone? "It will certainly make my income tax a lot easier to figure," he joked. It was cancelled in the last year before the merger. Delta, the second-biggest U.S. carrier, said it already has industry-leading retirement benefits, but wouldn't comment specifically on pensions. Ideally, youd think that a responsible company would want to ensure theyre always on or above final glide for their pension obligations. Copyright 2005 LexisNexis, a division of Reed Elsevier Inc. All rights reserved. If airlines conclude that it is no longer efficient to run an aircraft, then it goes through the retirement process. If youre like me, you have a flying habit that youll need support. But the number of pilots who got zeroed out was larger than many expected, and the requirement to pay Delta for health benefits makes the pill even more bitter. The retired Boeing 767 captain said he expected his $2,460-a-month pension to shrink by about 70 percent after Delta last summer won bankruptcy court approval to terminate its pilot pension plan. Northwest's pension fund consists of three individual plans, for about 8,000 pilots, 9,000 salaried employees and 52,000 unionized workers, including mechanics and agents. The government has subpoenaed voluminous and detailed information from Northwest going back to January 2002, when both the airline and its pension fund faced severe financial pressures after the terrorist attacks of 2001 and the bursting of the technology bubble in the stock market. Its first international flight was from the Twin Cities to Winnipeg in 1928, according to the Minnesota Historical Society (MHS). 130 E. Randolph St. Expenses were $194,155,483 (benefits paid). [File Photo: Adobe Stock]. Administration expenses were $17,035,079. Suite 3200 At the end of 2004, the plans owed a total of $9.2 billion to their participants but had assets of just $5.4 billion. You have the choice to enroll in Medical/Prescription Drug coverage, Dental coverage and Vision coverage. Delta today announced that it has reached a comprehensive settlement agreement that will resolve all issues in connection with the termination of the Delta Pilots Retirement Plan (Pilot Plan) with the Pension Benefit Guaranty Corporation (PBGC), the federal agency charged with insuring the nation's pension plans under ERISA. "I just knew this was going to be a dead-end battle, which is why I retired.". 53 of 61. # A1430. "Several. A federal judge has denied dismissal of a lawsuit in which five former employees of Delta Air Lines allege Delta and its administrative committee improperly reduced their pension benefits from the Northwest Airlines Pension Plan for Contract Employees. Investment gains (losses) and expenses are allocated to the Plan upon its send us a brief summary of the Plan (Northwest Airlines Pension Plan for Employees caught up in recent pension fund collapses have said they were not adequately warned of the impending failure and have questioned how it could have happened if the people in charge had kept their interests foremost. The Labor Department is investigating whether Northwest Airlines systematically shortchanged its employee pension fund over three years, then avoided having to make a $65 million payment to the fund by filing for bankruptcy protection just one day before the payment was due. The Contract Employees share of the Master Trust assets Have United drivers lost their pensions? Pension Plan for Contract Employees is approximately forty percent of the Master It's just not going to be as much fun as I thought it would be," he said. The Internal Revenue Service shares enforcement of the pension law, and it sometimes imposes excise taxes on companies that skip their pension payments. What will be the best performing asset class for 2023? For example, although Leighton only claimed to be entitled to temporary partial disability, the stipulation calculated his settlement based on his potential entitlement to permanent total disability. She noted that had the calculation reflected his claim, it would have calculated the payments based on his potential entitlement to temporary partial disability. the Plan under section 402 (a)(1) under the Pension Protection Act of 2006. Relevant points in the case include that although the agreements calculated the settlement amount from each plaintiffs potential entitlement to permanent total disability benefits, not all the plaintiffs claimed they qualified for permanent total disability. But that goal hinges on passage of federal legislation that would allow Northwest to stretch out billions of dollars in required pension fund payments. Unfortunately, our countrys laws make every traditional pension plan this vulnerable. Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors. This mutual silence suggests that nothing in the clear language of either document supported the committees conclusion. A union spokeswoman declined to comment on the memos. This is a governmental insurance policy for pension plans. Benefit levels for various groups Page 18 of 61. It suggests that the Labor Department is looking for a way to break an entrenched pattern, in which distressed companies quietly deplete their pension funds over a number of years, then declare bankruptcy and transfer huge obligations to the federal government. If a recession reduces the funds in the pension plan enough, its possible for the ongoing payouts to deplete the accounts too quickly. When Northwest Airlines and Delta Air Lines merged in 2008, they created the worlds largest airline, and one that to this date still ranks as the largest in several metrics including assets owned and market capitalization. In other words, they are not receiving a monthly workers compensation entitlement in addition to their monthly pension. My name is Keishi Nukina, and I am an aviation enthusiast, writer, and photographer based in Japan. I wrote a letter to Mr. Robert Kight, Vice President-Compensation, Benefits, and More than 2,300 pilots had retired since 2003, draining plan assets. They all retired from NWA after April 30, 1992, after having completed 10 years of vesting service. In this report all of the necessary Airline officials say they want to avoid handing off their pension obligation on the federal government. A fund has been "unfrozen" only once, during steelmaker LTV Corp.'s bankruptcy in the late 1980s, he said. 2023 Endeavor Business Media, LLC. Despite this assertion, a payment made to settle a legal claim is not the same relief as the payment Delta would have owed had the plaintiffs ultimately succeeded in their workers compensation actions. But McClain said he doesn't believe the Northwest pensions are in jeopardy -- if Congress grants the airline a new, more lengthy payment schedule. Delta recently estimated that retired pilots' average benefit will still be $75,200 on an annualized basis after the termination --- a figure that assumes self-disciplined drawdowns from their lump sums. Airline pilots used to get a sweet deal. "Several hurdles remain in constructing retirement plan options," Bill Bartels, chairman of the Air Line Pilots Association unit at Delta, said in a separate note to members. the end of the year). beginning of the Plan year and Plan assets at the end of the plan year. least the amounts necessary to meet minimum funding requirements of ERISA. Sample QDRO Pricing Thats a Good Thing, A Better Way to Fund Electric Aircraft R&D. Fiduciary duties to pension participants can sometimes collide with corporate officials' fiduciary duties to their shareholders, especially when a company is struggling financially and trying to conserve cash. Many members of the House have also said they support additional relief for the major airlines, fearing that without it, the pension plans will simply fail. The investigation has implications for many businesses besides Northwest that have shaky pension plans. They won't take her," said Cochran. Delta angered some retirees by warning that it could take the PBGC "several years" to review the airline's estimates, and to send any questions to the airline in writing. The committee also had a fiduciary obligation to follow these plan requirements. At the time, the I.R.S. 5500) Financial Information, Page 37, because of missing information for the This week a lawyer for Delta Air Lines said in an arbitration hearing that it was "more likely than not" that Delta would send its pension funds to the Pension Benefit Guaranty Corporation. Because Delta challenged plaintiffs workers compensation claims and the parties stipulated to the dismissal of those claims, the underlying benefit was never payable. Nothing in the plan contemplates workers compensation settlements and nothing in the stipulations contemplates the pension plan. pension plan. An offset is valid under ERISA if it is authorized by the plan. There is a lot of interesting information in In the Audit, page 46, year ended Sept. 30, 2009, assets $1,738,184,000. maintaining the fund, fees and commissions. Copyright 20082023, Glassdoor, Inc. "Glassdoor" and logo are registered trademarks of Glassdoor, Inc. Former Reservation Sales Agent in Minneapolis, MN, Minnesota. Reported by Rebecca Moore Northwest's filing with the Securities and Exchange Commission says that participants' benefits accruals were frozen as of August 31. Indeed, Delta has said it intends to keep a larger pension plan for nonpilot employees. To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market. Still, he is philosophical about Delta's pension-cutting moves. United pilots' pension fund was terminated in its 2002 bankruptcy and taken over by the PBGC. Delta Air Lines Must Face Lawsuit Over Pension Payments, Attorneys Say Guaranteed Income Safe Harbor Clearer Than Previous Guidance, IRS Proposes Rules That Require Retirement Forfeitures Be Used in 12 Months, Top Economist: Recession Coming, But Boomer Retirees to Mitigate Job Cuts, 401(k) Plan Fees Continue Decline on CITs, Lower-Cost Funds, House Passes Resolution to Repeal DOL 401(k) ESG Rule, IRI to Push for Annuities as Default Retirement Investment Option in 23, Most Advisers Seeking Options Like HSAs, 529s to Compete for New Plans, Research Shows Workers Favor Guaranteed Income Over Financial Wellness Tools, Nonqualified Deferred Compensation Plans Increasingly Include Noncompete Clauses, Outdated Mortality Table ERISA Suit Filed in Arizona. You can find everything printed here in Deltanet Employee Connection (found on Trust. my dad was there 50 years,, if nyrob ran northwest it would still be here today, Your email address will not be published. The remainder will be made up in reduced benefits. All rights reserved. Required fields are marked *. The committee defined payable as something that may, can or must be paid, and argued that because Delta paid the settlement, the underlying workers compensation benefit was something that can be paid. Now that income is gone, too, as a result of the pension plan termination. I know that United has a hub in ORD and that is close to MSP and DTW (both hubs for NWA). But, I am going to introduce you to a couple of ways you can experiment with to try a business class flight without having to spend thousands of dollars. 3. other Defined Benefit Pension Plans sponsored by the company, in the Master Invest as much as you can for your own future. Wow. NORTHWEST AIRLINES INC. 2700 Lone Oak Pkwy. 612-726-3774. Therefore, plaintiffs failed to state a claim for breach of fiduciary duty, Ericksen wrote. An S&P index of the five biggest U.S. airlines was little changed at 2:38 p.m. Tuesday, leaving it down 6.1% this year.

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