You are correct this is smoke and mirrors,business as usual... I don't' see a consensual agreement not with this company or union nor would I trust either!!!
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Pension Freeze Proposal From AA
- Thread starter ord78
- Start date
You are correct this is smoke and mirrors,business as usual... I don't' see a consensual agreement not with this company or union nor would I trust either!!!
Why in the world would anyone think a freeze is better than a termination. Aside from the 55k/yr payout cap, the PBGC adheres, to the letter, the conditions of your particuler plan. There is one HUGE difference in that you can collect your pension while still employed @ AA with a terminated pension. Not so under a freeze. In my case I can collect about 20k/yr until the day I actually retire if the PBGC administered our pension. Another example of the international looking out for their own interest while throwing the membership under the bus.
- Aug 20, 2002
- 7,319
- 1,555
Agreed, should we replace the international?
Buster CRC
Advanced
Only thing now before we can replace the TWU they will have us locked down to a 6 year deal
Unless they draw another line in the sand and demand just 5 like last time.
Unless they draw another line in the sand and demand just 5 like last time.
787nightmare
Veteran
- Aug 28, 2010
- 722
- 153
Whatever you guys do-or whatever winds up being imposed(I won't be around)....there is NO WAY you guys should allow that worthless bunch to saddle you guys w a 6 yr deal.
2-3(max)deal. It appears the play will be 2003 redeaux...
And they're counting on petrified members to play "roll over rover"-again. So predictable-and unbelievable.
And one more thing....it should be VERY DOABLE getting rid of the TWU after these OH bases are decimated. Do it!
2-3(max)deal. It appears the play will be 2003 redeaux...
And they're counting on petrified members to play "roll over rover"-again. So predictable-and unbelievable.
And one more thing....it should be VERY DOABLE getting rid of the TWU after these OH bases are decimated. Do it!
- Aug 20, 2002
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You mean you would advocate the demise of fellow mechanics who like you are in favor of removing the TWU?
Ahh, I get it. We should terminate so you can double dip.
What about the members that were going to lose money because of the PBGC limits? I bet they are glad the TWU looked after their best interests.
What about the members who can now retire early as planned because they can use the level income option that is not available under a termination. I bet they are glad The TWU looked after their best interests.
Sorry you can't double dip. Or is it triple dip with a social security draw or military draw?
787nightmare
Veteran
- Aug 28, 2010
- 722
- 153
Buck, I'm not advocating the demise of anyone. It appears to me that the Co is going to get there wish(one way or another-or close to it), & OH is going to be butchered. IMO....
And since OH (gen TULE) has stood in the way (with AA/TWU doing everything in there power to stop the rep election efforts), the base/s won't be near the factor they have been in the past. It SHOULD be relatively easy after all is said/done to accomplish the task of removing the TWU once & for all. Or so it seems...
- Aug 20, 2002
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Yes I agree, but the relatively easy part is the part I cannot ignore. Many that have been part of this struggle in the past thought it would be easy, but it isn't.
I do have a question that will come up in the attempt to replace the TWU. Once the new union is in place are we.going to be on a this board, advocating the wage separation between overhaul and the line?
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,662
- Banned
- #55
The 2% (presumably of the TWU/APFA) population that would receive better benefits under a freeze vs. a termination is with respect to the dollar amount of their pension benefits, not the time at which they could draw them.
While your ability to draw PBGC benefits while still employed at AA might be a benefit to a few, how many really want to work long after they can begin receiving pension benefits under even the PBGCs HIGHER age for beginning pension benefits compared to the terms of AA's plans.
Considering that the industry is going to continue to shrink as fuel prices increase, many people will want to get out of the airline industry or anything related to it.... current capacity and current numbers of employees are based on the current levels of fuel. The notion that deregulation of the airline industry would bring many more choices to consumers will give way to air fares which will continue to increase in large part to recover ever increasing fuel prices. The difference now vs. a decade or two ago is that existing airlines have a great deal MORE control over capacity NOW and are making good decisions about removing excess capacity and resizing networks based on demand levels appropriate to current fuel prices.
The fact that AA has not announced any large scale cuts in capacity since entering BK says they are still struggling to come up w/ a business plan that works w/ current fuel levels.... and their desire to try to get deeper SHORT TERM payroll costs at the expense of longer term pension liabilities shows that they realize their only way out of BK is to cut deep enough NOW in order to stand a chance to reorganize.
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So, those of you who are considering the value of freezing vs terminating the pension plan need to consider the long term viability of the airline industry in light of increasing fuel costs - and AA's ability to find a new role for itself in that industry.... and the implications of both are long some people want to remain in the airline industry.
While your ability to draw PBGC benefits while still employed at AA might be a benefit to a few, how many really want to work long after they can begin receiving pension benefits under even the PBGCs HIGHER age for beginning pension benefits compared to the terms of AA's plans.
Considering that the industry is going to continue to shrink as fuel prices increase, many people will want to get out of the airline industry or anything related to it.... current capacity and current numbers of employees are based on the current levels of fuel. The notion that deregulation of the airline industry would bring many more choices to consumers will give way to air fares which will continue to increase in large part to recover ever increasing fuel prices. The difference now vs. a decade or two ago is that existing airlines have a great deal MORE control over capacity NOW and are making good decisions about removing excess capacity and resizing networks based on demand levels appropriate to current fuel prices.
The fact that AA has not announced any large scale cuts in capacity since entering BK says they are still struggling to come up w/ a business plan that works w/ current fuel levels.... and their desire to try to get deeper SHORT TERM payroll costs at the expense of longer term pension liabilities shows that they realize their only way out of BK is to cut deep enough NOW in order to stand a chance to reorganize.
.
So, those of you who are considering the value of freezing vs terminating the pension plan need to consider the long term viability of the airline industry in light of increasing fuel costs - and AA's ability to find a new role for itself in that industry.... and the implications of both are long some people want to remain in the airline industry.
- Aug 20, 2002
- 7,319
- 1,555
Termination vs Freeze of Defined Benefit Plan
March 8, 2012
AMR has agreed to “freeze” the Retirement Benefit Plan of American Airlines, Inc. for Employees Represented by the Transport Workers Union (TWU) of America, AFL-CIO (“the Plan”). This is the alternative to terminating the Plan and turning it over to the Pension Benefit Guaranty Corporation (“PBGC”). Keeping the Plan up and running is advantageous to TWU members in several ways.
1. Beneficial Early Retirement Benefits Are Preserved.
The Plan currently allows Participants to retire between ages 60-65 without taking any reduction to their normal retirement benefit (the retirement benefit a qualified participant would receive at age 65). Participants between ages 55-60, with 15 years of service, take only a 3% reduction per year to their normal retirement benefit. These generous early retirement benefits are entirely preserved under the freeze agreed to by AMR. Under a termination of the Plan, all subsidized early retirement benefits are eliminated. Participants can still retire early, but they will have to take the actuarial reduction to their normal retirement benefit for each year that they retire between ages 55 and 65. This could mean a reduction to a Participant’s normal retirement benefit of more than 6% per year of retirement prior to age 65.
For a normal retirement benefit of $1,000.00 per month and an actuarial reduction of 6% per year, this means.(note 1):
Under this scenario, a member who retired at age 60 would have a 30% lower monthly pension under a terminated plan than he would have under the frozen Plan. At age 55, a member would have a 47% lower monthly pension under a terminated plan compared to the frozen Plan.
_______________
1 This table is for illustrative purposes only and should not be relied upon as a benefit determination. The actual benefit amounts at differing retirement ages under the freeze and termination scenarios will need to be determined by a qualified actuary.Thus, benefits for early retirees under the frozen Plan agreed to by AMR are considerably more generous than they would be under a terminated plan taken over by the PBGC.
2. Benefits Under a Terminated Plan Are Subject to a Maximum Ceiling Set by the PBGC.
The PBGC “insures” defined benefit plans. The Plan pays annual premiums to the PBGC, and, in the event the Plan is terminated, the PBGC takes over the Plan and pays the benefits. However, benefits payable by the PBGC are subject to benefit maximum amounts set by law and those maximum benefit amounts could reduce a participant’s pension benefit that would otherwise be payable by the Plan. The maximum benefit amounts are also subject to change and could be reduced if the PBGC’s funding position continues to decline as it has in recent years. According to the PBGC’s latest Annual Report, “As of September 30, 2011, we had single-employer assets totaling $79 billion, an increase of about $1.5 billion from the close of the previous fiscal year. Our single-employer liabilities (measured in present value though they will be paid over decades) totaled $93 billion.” That is a $14 billion shortfall in PBGC’s funding. Relying on the PBGC to pay members’ benefits 5, 10 or 20 years into the future is not a sure bet.
Freezing the Plan means that the benefit amount an employee has earned as of the freeze date will not change at this time. Unlike the PBGC guarantees, frozen benefits are not subject to any maximum benefit payment amounts – they are equal to the benefit a participant has earned. And, while no additional accruals will be earned under the Plan after the freeze date, current Participants continue to earn service toward vesting so those with fewer than five years of vesting service (generally required to receive a benefit under the Plan) can continue working toward benefit eligibility.
Freezing a defined benefit plan requires the Plan sponsor, in this case AMR, to continue funding the Plan as it would if the Plan had not been frozen. “Accrued liabilities”, which are the costs of employees’ future benefits, must be funded just like an on-going plan. The Plan remains subject to all the legal requirements of ERISA, which is the law that protects workers’ pensions.
3. A Frozen Plan Can Be Unfrozen Whereas a Terminated Plan Cannot Be Unterminated.
A frozen plan can be amended in the future to “unfreeze” benefit accruals. This means that AMR and the TWU retain the option to unfreeze the Plan and allow Participants to begin accruing new pension benefits. This option is not available once a plan has been terminated.
***
While a frozen Plan will not provide for future benefit accruals, and there is no guarantee that AMR might not in the future seek to terminate the plan, this approach is preferable to Plan termination now because it keeps generous early retirement benefits, currently preserves the benefits which members have worked toward over their careers without a maximum benefit ceiling, and maintain the option of unfreezing the Plan in the future.
March 8, 2012
AMR has agreed to “freeze” the Retirement Benefit Plan of American Airlines, Inc. for Employees Represented by the Transport Workers Union (TWU) of America, AFL-CIO (“the Plan”). This is the alternative to terminating the Plan and turning it over to the Pension Benefit Guaranty Corporation (“PBGC”). Keeping the Plan up and running is advantageous to TWU members in several ways.
1. Beneficial Early Retirement Benefits Are Preserved.
The Plan currently allows Participants to retire between ages 60-65 without taking any reduction to their normal retirement benefit (the retirement benefit a qualified participant would receive at age 65). Participants between ages 55-60, with 15 years of service, take only a 3% reduction per year to their normal retirement benefit. These generous early retirement benefits are entirely preserved under the freeze agreed to by AMR. Under a termination of the Plan, all subsidized early retirement benefits are eliminated. Participants can still retire early, but they will have to take the actuarial reduction to their normal retirement benefit for each year that they retire between ages 55 and 65. This could mean a reduction to a Participant’s normal retirement benefit of more than 6% per year of retirement prior to age 65.
For a normal retirement benefit of $1,000.00 per month and an actuarial reduction of 6% per year, this means.(note 1):
Under this scenario, a member who retired at age 60 would have a 30% lower monthly pension under a terminated plan than he would have under the frozen Plan. At age 55, a member would have a 47% lower monthly pension under a terminated plan compared to the frozen Plan.
_______________
1 This table is for illustrative purposes only and should not be relied upon as a benefit determination. The actual benefit amounts at differing retirement ages under the freeze and termination scenarios will need to be determined by a qualified actuary.Thus, benefits for early retirees under the frozen Plan agreed to by AMR are considerably more generous than they would be under a terminated plan taken over by the PBGC.
2. Benefits Under a Terminated Plan Are Subject to a Maximum Ceiling Set by the PBGC.
The PBGC “insures” defined benefit plans. The Plan pays annual premiums to the PBGC, and, in the event the Plan is terminated, the PBGC takes over the Plan and pays the benefits. However, benefits payable by the PBGC are subject to benefit maximum amounts set by law and those maximum benefit amounts could reduce a participant’s pension benefit that would otherwise be payable by the Plan. The maximum benefit amounts are also subject to change and could be reduced if the PBGC’s funding position continues to decline as it has in recent years. According to the PBGC’s latest Annual Report, “As of September 30, 2011, we had single-employer assets totaling $79 billion, an increase of about $1.5 billion from the close of the previous fiscal year. Our single-employer liabilities (measured in present value though they will be paid over decades) totaled $93 billion.” That is a $14 billion shortfall in PBGC’s funding. Relying on the PBGC to pay members’ benefits 5, 10 or 20 years into the future is not a sure bet.
Freezing the Plan means that the benefit amount an employee has earned as of the freeze date will not change at this time. Unlike the PBGC guarantees, frozen benefits are not subject to any maximum benefit payment amounts – they are equal to the benefit a participant has earned. And, while no additional accruals will be earned under the Plan after the freeze date, current Participants continue to earn service toward vesting so those with fewer than five years of vesting service (generally required to receive a benefit under the Plan) can continue working toward benefit eligibility.
Freezing a defined benefit plan requires the Plan sponsor, in this case AMR, to continue funding the Plan as it would if the Plan had not been frozen. “Accrued liabilities”, which are the costs of employees’ future benefits, must be funded just like an on-going plan. The Plan remains subject to all the legal requirements of ERISA, which is the law that protects workers’ pensions.
3. A Frozen Plan Can Be Unfrozen Whereas a Terminated Plan Cannot Be Unterminated.
A frozen plan can be amended in the future to “unfreeze” benefit accruals. This means that AMR and the TWU retain the option to unfreeze the Plan and allow Participants to begin accruing new pension benefits. This option is not available once a plan has been terminated.
***
While a frozen Plan will not provide for future benefit accruals, and there is no guarantee that AMR might not in the future seek to terminate the plan, this approach is preferable to Plan termination now because it keeps generous early retirement benefits, currently preserves the benefits which members have worked toward over their careers without a maximum benefit ceiling, and maintain the option of unfreezing the Plan in the future.
Yes and so can everyone else
How many members pensions excede 55k/yr
What about those who have pushed back early retirement because of the paycuts and rif's the past 9 years,double dipping for a few years can help them catch up
Yes I will triple dip for a few years so that I can retire some day
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,662
- Banned
- #58
I don't think there should even be an iota of hope that an airline industry pension plan would ever be "unfrozen".... the odds might be slightly higher in other industries but not by much.
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It is also very hard to terminate a plan - even one that is already frozen - without being in BK. Not impossible - but very unlikely. No company is going to develop a plan that would allow for a future termination because doing so would wipe out the equity that is the basis for the reorganization.
If AA comes out of reorg with frozen pensions, they have to build a business case based on keeping them frozen... termination will only come if they cannot successfully operate the business even after emerging. Given that wages and benefits are being cut so deeply and a major part of an airline's ability to cut costs in BK comes from labor,
AA has very little chance of being able to return to BK and reorganize again.
AA's decision to wait longer to file for BK makes it more imperative for them to get it right this time and leaves little room for being able to "tweak" a business plan that doesn't deliver what they originally promised.
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It is also very hard to terminate a plan - even one that is already frozen - without being in BK. Not impossible - but very unlikely. No company is going to develop a plan that would allow for a future termination because doing so would wipe out the equity that is the basis for the reorganization.
If AA comes out of reorg with frozen pensions, they have to build a business case based on keeping them frozen... termination will only come if they cannot successfully operate the business even after emerging. Given that wages and benefits are being cut so deeply and a major part of an airline's ability to cut costs in BK comes from labor,
AA has very little chance of being able to return to BK and reorganize again.
AA's decision to wait longer to file for BK makes it more imperative for them to get it right this time and leaves little room for being able to "tweak" a business plan that doesn't deliver what they originally promised.
