PoorPropDriver
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- Jan 17, 2003
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U Seeks To Spread Out Pension Payments
- Thread starter PoorPropDriver
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USA320Pilot
Veteran
- May 18, 2003
- 8,175
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According to the Washington Post, "Randy Clerihue, a spokesman for the Pension Benefit Guaranty Corp., said that for the IRS to agree to such a request, the airline must make available appropriate collateral. The IRS and the PBGC, the federal agency that monitors corporate pension plans, would decide on the type of collateral US Airways should offer, Clerihue said. After US Airways submits its request, a decision would take at least a month, he said.
Such requests of the IRS are not uncommon. Last year, Northwest Airlines Corp. won approval from the tax agency to stretch out payments of $454 million into its pension plan for its salaried and contract employees over five years," the Post reported.
See Story
Waiver Sought
ARLINGTON (theHub.com - US Airways today said it will ask the Internal Revenue Service for authority, as permitted under IRS rules, to reschedule contributions to the defined benefit pension plans for the Association of Flight Attendants and the International Association of Machinists, representing mechanical and related employees.
“Rescheduling these payments will help US Airways to conserve its cash so that we have sufficient liquidity to operate the airline,†said Jerry Glass, senior vice president of Employee Relations. “This is an important step as we work to ensure our survival and future prosperity,†he said.
A letter has been sent to employees in both work groups explaining the company’s action. The two plans would be treated the same under the proposed payment rescheduling.
Under IRS rules, US Airways is required to make contributions of approximately $67.5 million total to the AFA and IAM plans for the 2004 plan year. If the application for a waiver is approved, the company will be able to spread out these contributions for the 2004 plan year for up to five years rather than the 18 months during which the contributions otherwise would have been made.
Because US Airways already has contributed $28.6 million to the AFA and IAM plans during 2004, the company intends to apply that amount toward the last 2003 plan year payment, which is due on Sept. 15.
The proposed payment rescheduling would have no impact on retirees. For current employees, pension benefits will still begin when an employee retires and continue throughout the employee’s lifetime.
The following are answers to commonly asked questions.
Q. Why is the company seeking to spread out payments to the AFA and IAM defined benefit pension plans?
A. In a nutshell, to preserve liquidity at a critical time for the company. As the company moves to transform itself into an airline capable of competing in today’s environment, it will require time and significant cash
Q. How much is due in pension fund payments for the 2004 plan year?
A. A total of approximately $67.5 million is due for the AFA and IAM plans for the 2004 plan year.
Q. If the waiver is granted, does this mean US Airways will make no payments into the plan for 2004?
A. No it does not. US Airways is asking the IRS to allow it to spread out payments that would be due over an 18-month period for up to five years instead.
Q. Isn’t this what United Airlines just did?
A. No. Last month United, which is operating under bankruptcy court protection, said it would stop making any contributions to its defined benefit pension plans until it emerges from bankruptcy. United told the judge its lenders would not allow it to keep making payments.
US Airways is not petitioning the IRS to stop payments. The company has only asked for permission to reschedule 2004 plan year payments.
Q. How will a rescheduling of payments affect retirees and current employees?
A. If our waiver application is approved, it will not have any impact on pension payments under these plans. The plans will still be obligated to make current monthly pension payments on time and in full. A rescheduling of these payments will also have no impact on a current employee's ability to retire under these plans.
Q. Why does this apply only to the AFA and IAM plans?
A. Those are the only two work groups that have defined benefit pension plans for which the company is required to make contributions. Others in the company are covered by defined contribution plans in which US Airways contributes to individuals’ 401(k) plans.
Q. What happens if the IRS does not approve the request for a waiver?
A. Without the waiver, the required contributions for the Plan Year 2004 will significantly impact the company's ability to successfully implement its Transformation Plan, thereby causing US Airways temporary, substantial business hardship.
Respectfully,
USA320pilot
Such requests of the IRS are not uncommon. Last year, Northwest Airlines Corp. won approval from the tax agency to stretch out payments of $454 million into its pension plan for its salaried and contract employees over five years," the Post reported.
See Story
Waiver Sought
ARLINGTON (theHub.com - US Airways today said it will ask the Internal Revenue Service for authority, as permitted under IRS rules, to reschedule contributions to the defined benefit pension plans for the Association of Flight Attendants and the International Association of Machinists, representing mechanical and related employees.
“Rescheduling these payments will help US Airways to conserve its cash so that we have sufficient liquidity to operate the airline,†said Jerry Glass, senior vice president of Employee Relations. “This is an important step as we work to ensure our survival and future prosperity,†he said.
A letter has been sent to employees in both work groups explaining the company’s action. The two plans would be treated the same under the proposed payment rescheduling.
Under IRS rules, US Airways is required to make contributions of approximately $67.5 million total to the AFA and IAM plans for the 2004 plan year. If the application for a waiver is approved, the company will be able to spread out these contributions for the 2004 plan year for up to five years rather than the 18 months during which the contributions otherwise would have been made.
Because US Airways already has contributed $28.6 million to the AFA and IAM plans during 2004, the company intends to apply that amount toward the last 2003 plan year payment, which is due on Sept. 15.
The proposed payment rescheduling would have no impact on retirees. For current employees, pension benefits will still begin when an employee retires and continue throughout the employee’s lifetime.
The following are answers to commonly asked questions.
Q. Why is the company seeking to spread out payments to the AFA and IAM defined benefit pension plans?
A. In a nutshell, to preserve liquidity at a critical time for the company. As the company moves to transform itself into an airline capable of competing in today’s environment, it will require time and significant cash
Q. How much is due in pension fund payments for the 2004 plan year?
A. A total of approximately $67.5 million is due for the AFA and IAM plans for the 2004 plan year.
Q. If the waiver is granted, does this mean US Airways will make no payments into the plan for 2004?
A. No it does not. US Airways is asking the IRS to allow it to spread out payments that would be due over an 18-month period for up to five years instead.
Q. Isn’t this what United Airlines just did?
A. No. Last month United, which is operating under bankruptcy court protection, said it would stop making any contributions to its defined benefit pension plans until it emerges from bankruptcy. United told the judge its lenders would not allow it to keep making payments.
US Airways is not petitioning the IRS to stop payments. The company has only asked for permission to reschedule 2004 plan year payments.
Q. How will a rescheduling of payments affect retirees and current employees?
A. If our waiver application is approved, it will not have any impact on pension payments under these plans. The plans will still be obligated to make current monthly pension payments on time and in full. A rescheduling of these payments will also have no impact on a current employee's ability to retire under these plans.
Q. Why does this apply only to the AFA and IAM plans?
A. Those are the only two work groups that have defined benefit pension plans for which the company is required to make contributions. Others in the company are covered by defined contribution plans in which US Airways contributes to individuals’ 401(k) plans.
Q. What happens if the IRS does not approve the request for a waiver?
A. Without the waiver, the required contributions for the Plan Year 2004 will significantly impact the company's ability to successfully implement its Transformation Plan, thereby causing US Airways temporary, substantial business hardship.
Respectfully,
USA320pilot
BoeingBoy
Veteran
- Nov 9, 2003
- 16,512
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- #3
"Randy Clerihue, a spokesman for the Pension Benefit Guaranty Corp., said that for the IRS to agree to such a request, the airline must make available appropriate collateral."
The following is from the 2Q04 report...
"The ATSB Loan is secured by substantially all of the assets of US Airways Group and its subsidiaries not otherwise encumbered."
Wonder what "appropriate collateral" we could provide?
Jim
The following is from the 2Q04 report...
"The ATSB Loan is secured by substantially all of the assets of US Airways Group and its subsidiaries not otherwise encumbered."
Wonder what "appropriate collateral" we could provide?
Jim
PITbull
Veteran
- Dec 29, 2002
- 7,784
- 456
Actually, AFA and IAM are not the only defined pensions left on U property. Ther is still the Customer Service Agents and certain managment that had their defined pensions frozen in 1992.
The co. still has a liability on those pensions to pay.
I am not opposed to the co. making such a request.
The co. still has a liability on those pensions to pay.
I am not opposed to the co. making such a request.
BoeingBoy
Veteran
- Nov 9, 2003
- 16,512
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- Banned
- #5
PitBull,
The thing I would be worried about if I was in one of these DB plans is a distres termination. In that case, the better the plan is funded, the better off you'll be.
And I'll admit that I don't know if a distress termination is an option outside of BK or not.
Jim
The thing I would be worried about if I was in one of these DB plans is a distres termination. In that case, the better the plan is funded, the better off you'll be.
And I'll admit that I don't know if a distress termination is an option outside of BK or not.
Jim
mwereplanes
Senior
- Jan 21, 2004
- 302
- 0
What about the defined benefit plans for the officers of the corporation. You know, the ones not covered by the collective bargaining agreements. I would think that would save a few buck too.
This company does not want to enter C11 again. My reasoning is that they (Bronner and RSA) stand a better than even chance of losing control of the company and becoming a minority stake holder if a bidding war breaks out over new DIP financing. They know they have a money machine on their hands if it is run correctly. This is why the request for the pension payment deferral.
Someone shoot this reasoning down please. I'm trying to figure out how I could be off on this scenario.
mr
This company does not want to enter C11 again. My reasoning is that they (Bronner and RSA) stand a better than even chance of losing control of the company and becoming a minority stake holder if a bidding war breaks out over new DIP financing. They know they have a money machine on their hands if it is run correctly. This is why the request for the pension payment deferral.
Someone shoot this reasoning down please. I'm trying to figure out how I could be off on this scenario.
mr
BoeingBoy
Veteran
- Nov 9, 2003
- 16,512
- 5,865
- Banned
- #8
mwereplanes,
As for the executive pensions, I have no detailed info on the plan here at U. However, it is my understanding that these plans are not like the other DB plans. There is generally no "fund" set up that payments are made to, with the fund paying benefits. As I understand it, these benefits are normally paid from the corporate coffers as they are due.
I tend to agree that another trip to BK is an absolute last resort and likely to result in liquidation. That is based on nothing more than the thought that if I had hundreds of millions at risk in this company and the choice was between going along with another BK and hoping for the best or getting my money back, I know which I'd choose.
Jim
As for the executive pensions, I have no detailed info on the plan here at U. However, it is my understanding that these plans are not like the other DB plans. There is generally no "fund" set up that payments are made to, with the fund paying benefits. As I understand it, these benefits are normally paid from the corporate coffers as they are due.
I tend to agree that another trip to BK is an absolute last resort and likely to result in liquidation. That is based on nothing more than the thought that if I had hundreds of millions at risk in this company and the choice was between going along with another BK and hoping for the best or getting my money back, I know which I'd choose.
Jim
28yrsnojob
Senior
- Jan 2, 2004
- 411
- 4
:down: worst thing they could do is to deferr the pension money because
whos to say they are going to put it in later.
whos to say they are going to put it in later.
