PBGC Rejects US Airways Pension Plans

[cavalier]

ALPA expected the PBGC response and I have been advised the PBGC has not taken action on the plans yet, although the initial Company/ALPA solution was rejected. Senator Spector and the Pennsylvania congressional delegation are still working this issue and it needs to be resolved one way or another.

Chip


-------------------------------------------------------------------------

"needs to be resolved"

Yes, stop trying to pay the pilots a pension like executives receive in other industries. Funny how a pilot has preached to all the workers why we must all bend over, when it's the pilots union’s extreme greed that could bring down the house in the end. Yes Chip, you have given until it hurts, but the pilots have taken until it crushed, with a pat on the back of past management, in the face of its union brothers and sisters. Look to 1992. Making millionaires out of retiring pilots, paying pilots to sit home, ALPA agreeing to the companies wishes at the expensive of other unions is now bearing fruit. This is contrary to some of your posts where the term altruism is implied, as if your group were the ones with compassion and wisdom. Nothing personal Chip, just a dumb mechanics point of view.

 

[Biffeman]

Cavalier you are not dumb, you are well spoken and speak the truth, and the truth is Chip and his pilot buds are scared they will lose their million dollar lump sum payment or their $10,000 a month pension. You see how fast they cave everytime the company asks. You see how Chip has become Dave and Dave's #1 cheerleader. They are in it for themselves and always have been, 92 proves it.[BR][BR]Also they know they cant find a job paying six figures if this place ever shuts the doors. So in reality they are just scared little men who try and prove they know everything and have the inside track when they have been proven wrong numerous times.

 

[chipmunn]

There is a Q&A posted on usairways.com, which is also being distributed to employees today that discusses the POR and pension issue.

Q. How much is the company's pension liability and how does this affect US Airways' ability to obtain final approval?

A. The company has an unfunded liability estimated at $3.1 billion over the next seven years and must resolve this issue to satisfy the requirements of the ATSB. The company continues to explore options to lower its pension expense. Resolution of our pension situation is a condition to the completion of our Plan of Reorganization because the business plan submitted to the ATSB and RSA assumes a solution to the pension liability issue.

Chip comments: ALPA and the Company have been working on this issue at very high levels within the Bush Administration and my other union colleagues are correct in that this is a pilot problem, but for this company to survive it must be worked out. I suspect the IAM, AFA, and other defined pension plans are safe, provided all union TA's are ratified before the January 16 Omnibus Hearing.

With the public news of Senator Specter's involvement and reportedly Senator Santorum as well, this could become a key issue for the Bush Administration. Bush must have Pennsylvania support for his re-election and has spent most of his recent time in this state drumming up campaign support.

I have been told the pension debate is now political and part of the greater country retirement problem. In my opinion, since the PBGC did not terminate the plan and instead rejected the company's solution, either the defined contribution plan will be put in place, which could have significant upside potential due to market conditions, or per the Pittsburgh Tribune review the Senate Transportation Committee will hold a hearing on this national problem lead by the US Airways example.

Management and labor have been working tirelessly to restructure the company and if the TAs get ratified (which is a must!) and we solve the pension problem (we will), the airline will finally achieve success. David Bronner is in if labor does its job, we are out of bankruptcy on schedule due to the pending war, and we go out and show the entire industry that businesses can be restructured with management working with labor.

Chip

 

[airlineorphan]

Since the topic of how US Airways' employees' retirement plan is not intertwined with the politics of the national retirement debate, I offer the following link....

-Airlineorphan

[url="http://www.solidarity.com/hkcartoons/mikejan3.html"]http://www.solidarity.com/hkcartoons/mikejan3.html[/url]

 

[ClueByFour]

[blockquote]
----------------
On 12/21/2002 7:54:27 AM Biffeman wrote:

Dio, if everyone here was so astound on wall street they would all be millionaires the markets are way down that is one of the main problems in regards to all companies and the pensions being underfunded. 401Ks are the not they way to go, ask enron and worldcom employees.
----------------
[/blockquote]

Only because those two plans required heavy investment in the host company stock. Most 401ks do not, and if you invest with a little bit of planning can put you in a much better position that a defined pension (notably, the PBGC is out of your life).

 

[mlt]

Retired 1,
I have no idea whether Piney Bob was referring to a cash balance pension plan or not; however, please allow me to explain my perception on why the labor groups should reject attempts to convert our plan to cbp:

Hypothetical:
A flight attendant who was hired at age 19 and has completed 30 years of service (age 49, too young to retire and collect benefits)and has his/her pension plan converted. What occurs...U estimates the value of the f/a's pension and assigns a fictious value to the f/a's account. Let's say the value is 300K ($15K per year and the flight attendant is projected to live 20 years after retirement). However, U only has 150K real dollars to invest and fund this account. Current thought in congress is to tie the interest to the treasury bond, I believe it is around 4.9%. Until the market elevates the actual balance to the fictious balance U is not required to make additional deposits. Based on this hypothetical you can see that the middle aged f/a might reach retirement age and never see their account fully funded. The years that the account is not funded are called the 'wear away years'. This is where the age discrimiation comes into play when converting these plans. It is very difficult for a middle-aged worker to ever realize the full value of his/her pension.

On the positive side, these plans are very advantageous to the younger worker as they allow them to begin accruing at the beginning of their career. Additionally, my perception is that if the younger worker leaves his/her job they are able to take the fund and convert into another avenue of retirement accounts.

 

[Biffeman]

Your pension is not nor will be gone, what you have vested is gauranted by the PBGC and their level of benefits.

 

[mlt]

Piney Bob,
The pension issue is very complicated. My understanding is: The law requires the PBGC to take a pension plan when the plan is only funded at 70% (ALPA is currently funded at 72%) and insists the corporation make the plan whole. However, U does not have the ability to deposit 1.2 billion into ALPA's account to bring them up to date, let alone deposit an additional 1 billion over the next 6 years. Therefore, the government can force the liquidation. Additionally, I believe U has the ability to go to the government pre 70% level and file a distress termination (acknowledge they are unable to fully fund the pension and voluntarily turn the fund over). Should this occur the pilots would receive a percentage of their expected pension while the other groups should receive the full value as they fall within the PBGC guidelines.

Regarding your suggestion of U mgm't. creating another type of pension. I guess the possibility exists. However, your suggestion of creatively converting the current plans would require the groups to hire the best legal representatives money could by as we are dealing with the shrewdest individuals to walk the earth! Case in point--IBM converted their employee pension plans a few years ago and portrayed them to the employees as the best pension idea going. However, they failed to address the wear-away years and their employees now find their retirement income significantly lower than projected. As a result they find themselves entangled in major litigation attempting to recoup their losses based on mgm'ts. neglect of full disclosure. (AT&T employees are currently in the same scenario). Although these plans were developed with the best intentions, they have become an avenue of deceit for corporate America and congress will be addressing this issue when they return in January.

 

[michael707767]

Boy, it does not look good for retirement plans. If I was within a few years, I'd go ahead and go early. Get my money now, before its all gone.

 

[Biffeman]

Bob US Airways has our pension, not the unions, please post accurate facts, the unions do not control nor administor's it, the company is in charge of it.

 

[Bear96]

[blockquote]
----------------
On 12/21/2002 700 AM chipmunn wrote:

Bear96:

I agree with you and I believe we were talking about two different points. You were discussing changing the plan and I was discussing a distressed termination.

Chip
----------------
[/blockquote]

Chip it doesn't matter. If the PBGC has to step in and declare a distressed termination as a result of the employers's choice to not fund the plan adequately enough to provide the benefits spelled out in the CBA, then the employer has still violated the CBA.

 

[diogenes]

[blockquote]
----------------
On 12/21/2002 9:41:36 AM mlt wrote:

Retired 1,
I have no idea whether Piney Bob was referring to a cash balance pension plan or not; however, please allow me to explain my perception on why the labor groups should reject attempts to convert our plan to cbp:

Hypothetical:
A flight attendant who was hired at age 19 and has completed 30 years of service (age 49, too young to retire and collect benefits)and has his/her pension plan converted. What occurs...U estimates the value of the f/a's pension and assigns a fictious value to the f/a's account. Let's say the value is 300K ($15K per year and the flight attendant is projected to live 20 years after retirement). However, U only has 150K real dollars to invest and fund this account. Current thought in congress is to tie the interest to the treasury bond, I believe it is around 4.9%. Until the market elevates the actual balance to the fictious balance U is not required to make additional deposits. Based on this hypothetical you can see that the middle aged f/a might reach retirement age and never see their account fully funded. The years that the account is not funded are called the 'wear away years'. This is where the age discrimiation comes into play when converting these plans. It is very difficult for a middle-aged worker to ever realize the full value of his/her pension.

On the positive side, these plans are very advantageous to the younger worker as they allow them to begin accruing at the beginning of their career. Additionally, my perception is that if the younger worker leaves his/her job they are able to take the fund and convert into another avenue of retirement accounts.
----------------
[/blockquote]
------------------------------------------------------------
MLT,

You are absolutely correct - run, don't walk from a CBP! The vast bulk of U employees across the work groups are of an age to be vulnerable to the issues you raise. There is on-going litigation, the basis of which CBP's are age discriminatory.

I would argue a DBRP is the best way to go. However, in view of DBRP's condition at U AND across the economic spectrum, they are a dying breed. Furthermore, management will keep holding ALPA hostage for more concessions to maintain that DBRP. Far better to cut the losses now. While DCRP's are not my preference, they are a viable alternative.

 

[oldiebutgoody]

Go Barb!

 

[mikeson]

pbgc has gotten tougher in recent months. Not even arlen specter is saving the day.

http://www.sunspot.net/business/bal-bz.bet...iness-headlines

 

[mikeson]

Beth will idle 500 at Point next week
Furloughs are viewed as a preliminary to job
reductions here; Steel market worsening; 'It is
inevitable that we have to cut our costs,' ailing firm's
CEO says

By Gus G. Sentementes
Sun Staff
Originally published December 21, 2002

Because of a "rapidly softening steel market,"
Bethlehem Steel Corp. will furlough 500 workers at
its Sparrows Point plant during Christmas week, the
company's chairman and chief executive said
yesterday.

Though for one week, the cutback is a precursor to
permanent work force reductions expected in the next
several months as the steelmaker tries to emerge from
bankruptcy either on its own or as part of another
company.

Robert S.
"Steve" Miller,
Bethlehem's
chairman and
chief executive,
said yesterday
there will be
job reductions
at Sparrows
Point in the
next couple of
months but
declined to
give a precise
number. Sparrows Point employs 3,300 workers.

"It is inevitable that we have to cut our costs," Miller
said.

Miller visited the Baltimore County plant yesterday
for meetings with employees and the media. The
session had been scheduled before the federal Pension
Benefit Guaranty Corp. terminated the bankrupt
company's pension plan Wednesday.

The PBGC's move has threatened a possible deal to
sell Bethlehem's assets to a rival steelmaker,
Cleveland-based International Steel Group Inc.,
officials from both companies said.

Tom Conway, chairman of the United Steelworkers
of America's negotiating committee, said he was
aware that Bethlehem will need significant job
reductions in order to be competitive.

As part of the current labor contract, the union and
the company would have to agree on those
reductions, Conway said. Both blue-collar and
white-collar jobs will be affected, he said.

"We're convinced that the steel industry is undergoing
sort of a historic change," Conway said. "Right now,
frankly, we compete against cheap imports and cheap
minimills. If we ignore it, we will eventually be
forced out of business."

Next week's temporary layoff is the second in a
month at Sparrows Point. Sparrows Point suspended
finishing operations during Thanksgiving week and
laid off 700 workers.

The finishing side of the plant will also be affected
next week when the hot mill, which turns slabs of
steel into thin coils, suspends operations.

At the plant's main office yesterday, Miller said
Bethlehem has a business plan to continue operating
through next year. The plan assumes that Bethlehem
no longer has to contribute to the pension plan, that
market conditions do not worsen and that it's able to
keep customers, he said.

Miller said the steel market is softening, particularly
in demand for products used by the construction
industry and which are made at Sparrows Point. He
said demand has remained strong at Bethlehem's
biggest plant, in Burns Harbor, Ind., which makes
steel for the automobile industry.

The PBGC, a government agency that insures pension
programs, said it moved to terminate the pension plan
and protect the benefits of 95,000 workers and
retirees - including 14,600 in the Baltimore area -
and limit its own liabilities. The agency would be
liable for $3.7 billion of the Bethlehem plan, which is
underfunded by a total $4.3 billion.

The pension takeover, which awaits court approval,
would rank as the government's largest in the PBGC's
28-year history. As of Dec. 18, Bethlehem workers
are no longer accruing new pension benefits.

Miller yesterday decried the PBGC's pension takeover
move, saying it disrupted plans with ISG and the
Steelworkers union to offer early-retirement
enticements to senior employees. But he said he
expects negotiations with ISG to continue past Jan. 6,
the formal deadline of the two companies' 60-day
exclusive exploration agreement.

"We have not made a decision on what course to
take," said Miller, referring to a possible Bethlehem
challenge in court to the pension plan's takeover.
"We'll try to negotiate with the PBGC. We're hoping
to get there by persuasion rather than litigation."

Sen. Barbara A. Mikulski, who flanked Miller at
yesterday's media briefing, said she was "outraged" by
the PBGC takeover.

Bethlehem is based in Pennsylvania, and Mikulski
said she would enlist the support of that state's senior
U.S. senator, Arlen Specter, and lobby other top
government officials to pressure the PBGC to push
back its termination date to February.

"If they're going to make the lives of my steelworkers
miserable, I'm going to make their lives miserable,"
Mikulski vowed.

Miller contested the PBGC move, saying that
Bethlehem was not in arrears on its pension-funding
obligations. The company had expected to miss a
required $190 million payment in July 2003.

Jeffrey Speicher, a PBGC spokesman, said "it's not
necessary under the law for the plan to have missed
its minimum funding payments for termination."

Said Speicher: "The PBGC determined that the plan is
unaffordable and there's no reasonable scenario under
which the company or the bankruptcy estate would be
able to pay all of the benefits, given its level of
underfunding."

Copyright © 2002, The Baltimore Sun