More Pension and                       FICA Items:  Get that Form 843 -  Download from the IRS. ed
Jan 11, 2008 Editor, I would like to bring to attention that the ALPA Web page on legislative issues has Pension Reform at the top and again asks people to write in support of pending legislation. The measures would make age 60 the normal retirement age for those of us that were forced out at 60 and hence get rid of the early retirement penalty. Since active pilots can now go to 65 and collect a full PBGC pension, it only makes sense that they change the penalty on already retired pilots. I hope all retirees will write and ALPA continues to support....$$ for the change. John Myer UAL Retired Dec.19,2007 Special R & I Report Retirement Age 65 Last Friday afternoon, members of the US Airways MEC, JNC, R & I, Legal and Communications were briefed by a team from ALPA National lead by Manager of MEC Benefits, Steve Hodgson on the new Retirement Age 65 regulation. As you know, President Bush signed into law the "Fair Treatment of Experienced Pilots Act" which immediately rose the mandatory retirement age from 60 to 65. Many of ALPA’s recommendations to protect pilot interests were incorporated into this legislation. What is in the new law? 1.) As of December 13, 2007, pilots can fly to age 65. 2.) The change became law immediately and abolishes the age 60 regulation. 3.) Any pilot over 60 flying as a required crew member (flight engineers, second officer, etc) on the date of enactment can continue to fly. 4.) Pilots over age 60 can be rehired or hired by another carrier, but will restart at the bottom of the seniority list. 5.) Until the ICAO rules change, the law provides for an over/under split for international operations. For a pilot to serve as PIC and be over age 60 another pilot on the flight deck must be under age 60. 6.) Domestic pilots are not required to comply with the over/under split. 7.) All part 121 pilots over age 60 will be required to have a first class medical every 6 months and may be required to have additional line and or simulator evaluations. 8.) Carriers must bargain over changes to the collective bargaining agreements and benefit plans. Any amendments necessary to conform to the new law or to carry out the new law, requires bargaining by the company with the labor group. They may not unilaterally make changes to the CBA or benefit plan to conform to the new law. 9.) The Act limits lawsuits or other legal proceedings for all actions taken in compliance with the Age 60 rule or the new Age 65 rule. In looking over our present contract, we anticipate no real issues of concern. Our current contract has previously inserted language that was added to the retirement and disability sections. This language extends coverage to whatever the FAA mandated retirement age happens to be. Medical, dental and life insurance benefits should remain the same and intact as long as you are an active pilot on the seniority list. The new law also seems to have no effect on our survivor benefits. Pilots won’t be able to draw on their DC Plan or 401k Plan until they actually retire. Pilots that qualify for PBGC pensions will be able to draw on those benefits anytime after age 60. We’re sure there will be additional information available to us in the future. We will keep you updated as we receive the more data. Rich Alter, Chairman R & I Committee ------------------------------ If you wish to unsubscribe from this list, please go to https://crewroom.alpa.org/alpa/DesktopModules/ToPreferences.aspx to update your Standard Mailings and/or E-Mail Distribution Lists preferences. Note: you may be prompted to logon to access this page. On Sep 28, 2007, at 10:04 AM, Arvid von Nordenflycht wrote: Just a note to say that the telephone number for the Pension /Benefit department lady who is May Lou Gleason is 847 700 9909. You can leave her a message and request your UAL non-qual medicare tax denial letter.  She knows what it is.  State your file number,name, and mailing address and you should get denial. The denial letter is one of the steps that has to happen if you have/had non-qual tax money at stake and want to try to get it back. Call her to get a form letter from United outlining the inaction of United. ed  It will look like the letter on the right.	March 1, 2008 FICA Caim Correction. This argument of the 3 year statue has been bantered about by many IRS centers with regards to this claim and it has NO merit. It is simply their first attempt to deny your claim with the hopes that you will go away. The official termination date of the Non-Qualified plan has been established by the bankruptcy court to be 12/30/04. The last Non-Qualified check we received was 09/01/05. One can make an effective argument that it should be 3 years from either of those dates. Also consider that in 2007 we received 2 distributions from the bankruptcy court for the Non-Qualified settlement on 04/27 and 11/08. The 11/08 distribution is supposed to be the absolute final distribution from the Non-Qualified funds being held by the court. Henceforth, 3 years from 11/08/07 could also be argued and be plausible since you really can not calculate the exact amount of Medicare Tax you overpaid until you receive the absolute last distribution set aside for the settlement of this claim. Then throw in the fact that the IRS's chief council shut down the payments being made by the CVG office around the beginning of December and you can pick and choose any date you wish to make a mockery of this supposed 3 year statue argument made by the IRS. The Fresno office just has not been up to speed on this matter and they probably never will get all the facts right. Their handling of this matter in comparison to other IRS centers has been extremely poor. It looks like the IRS is stonewalling this claim trying to hide behind anything and everything with the hopes you will just give up and fold your tent. One of our guys in SEA got a flat out denial. He went to appeals and was awarded his claim. The appeals officer has told him that they work independently from the IRS district offices, also they do not have to abide by the chief council's directives if you can believe that. So it's beginning to look like you will have to get a rejection of your initial claim then process and appeal and hope to get an appeals officer who is a reasonable individual. I have said all along that if you stay the course that I believe you will ultimately be successful in obtaining your refund of the overpaid Medicare Tax. The problem is that there are too many of us who just don't want to stand up to the IRS on this matter. Bob Falco spondence Feb 22, 2008 MAURY ROSENBERG Thanks Arvid. My Tax Advocate called me a few days after I received the denial letter. She advised me to appeal and told me "She was informed the district IRS offices were told to deny the claims because they are from a nonqualified pension." I informed her I was going to appeal and I also had contacted my State Senator, Arlen Specter. His office responded and informed me they were going to query the IRS with regard to my claim. Maury ----- Original Message ----- From: Arvid Von Nordenflycht To: MAURY ROSENBERG Sent: Saturday, February 23, 2008 2:00 AM Subject: Re: FICA Appeals Hi, So far no one has started the appeal process as they are waiting for the mechanics of the appeal. Apparently all claims are now routinely denied. The IRS might even claim back the refunds that did get paid! So stay tuned. Arvid MAURY ROSENBERG <HABU273@msn.com> wrote: Hi Arvid, As advertised the IRS denied my 843 claim (Feb. 16th 2008) for excess payment of the HI portion of my non-qualified pension FICA taxes. Like some other pilots, I too ended up going through a tax advocate. I began my quest when I filed the 843 along with my taxes last April 2007 for the tax year 2006. My question is if anyone has pursued the appeals route and what their status, if any, has been in that process? Thanks, Maury Rosenberg Retired JFK 2003  Jan 11, 2008 Arvi, Just got this email and thought you might be interested in posting it. It’s the same info you’ve already put up from Jim Nugent except it speculates the IRS is going to seek refunds from those who have already been paid. Frank Williamson From: Lehrer, Jeff [mailto:jlehrer@cleary-gull.com] Sent: Monday, January 07, 2008 12:04 PM To: Lehrer, Jeff Subject: UAL FICA Dear Retired UAL Pilot: We recently sent you an email regarding your UAL Non-Qualified Pension Plan (NQP) and filing an IRS claim for a return of your excess FICA (Medicare) tax payments. We would like to update you that we have received information indicating that the IRS is putting a hold on honoring any claims pending a review, superseding any decisions from field IRS offices. The speculation is that they will deny all claims and seek refunds from those who have already received a refund. We do not have any additional information on what the proposed appeal process would be for denied claims. Unfortunately, we do not have formal confirmation from the IRS on this matter, but wanted to apprise you of the situation. This does not mean that you cannot still file a claim, however we strongly recommend you seek the advice of your tax advisor. Please give me a call if I can be of further assistance. Thank you, Jeff Jeffrey C. Lehrer, CFP® | Vice President Cleary Gull Inc. 100 East Wisconsin Avenue, Suite 2400 Milwaukee, Wisconsin 53202 414-291-4504 Office | 414-270-2298 Fax jlehrer@clearygull.com| clearygull.com Date: Thu, 20 Dec 2007 15:36:53 EST Subject: [retup] Medicare Refund I just received a call from my IRS advocate in Las Vegas. He had just gotten off the phone with his contact in the CVG IRS office. She told him that a decision had come down from Washington to deny all claims from United pilots. She gave no reason but said that a letter of denial would be sent to all claimants in early January explaining our appeal procedures. My advocate's boss in Las Vegas, upon hearing this, said that she would send a strongly worded letter to Washington explaining how unfair this decision was. A determination has not yet been made as to the status of those who have received a refund. If anyone has any other information on this travesty please let me hear from you. Jim Nugent                    Date: 10/10/200X Mr. UAL Pilot, After much research and careful consideration, United Airlines has decided not to pursue an IRS refund of FICA taxes paid on the Pilot Non-Qualified Plan lump sum payments. If you believe that you are entitled to a refund, you may contact your tax advisor or the IRS for details as to how you may file an individual claim. Mary Lou Gleason Benefits Analyst - Strategy & Design United Airlines 1-847-700-9909 Following these letters and notes is a comprehensive letter from Bob Falco. We hope it clears up our confusion,	Excess FICA Info Scroll on down for more. and click on these. FICA Refund FICA Medicare Refund Summary Info Help   Feb. 27, 2008 In response to my Dec. 11, 2008 IRS 843 claim, I just received a letter from the Fresno IRS Service Center, part of which I quote: "The law permits you to file a claim for the prior three years of taxes paid. Therefore, you may file a claim for FICA taxes paid for years 2004 through 2006. Claims for FICA taxes paid in 2003 and prior years are barred by the statute of limitations. " I have not seen on "retup" postings that anybody else has received this "statute of limitations" response. My initial response is to write the IRS and mention that pilots in other IRS regions seeking FICA refunds have received their FULL entitled FICA refunds for the same time period that I claim, and were not barred by the statute of limitations. Therefore I resubmit my claim as originally submitted. Before I do this, your thoughts.... Thanks. Ron Weber Arvi, In my humble opinion the tax period for Form 843 paragraph 1 in requesting a refund of Medicare tax should be from date of retirement to 4-27-07. This is the transaction date of the last UAUA stock settlement and also the date the U.S. Supreme Court denied our review of the termination of the Pilot's Pension Plan. Denny Fendelander
United Taking a Flier With Pensions United's Faustian Bargain      Part II Pension Discussions By Rich Duprey November 2, 2007 The Motley Fool http://tinyurl. com/3383wo Literature's Dr. Faustus is a scholar who has learned all there is to know and makes a pact with Mephistopheles, the devil, trading his soul for power and material gains. He's likened to Icarus, who flies so close to the sun his manmade wings melt, and he falls fatally to Earth. That seems like an apt metaphor for the deal United Airlines' parent UAL made with the government's Pension Benefit Guaranty Corp. (PBGC) in defaulting on its employee pensions. Apparently, I was too exuberant in suggesting the government give back to United the pension obligation it foisted on the PBGC. As part of its agreement with the airline, the PBGC imposed an extraordinary waiver of its powers and agreed not to seek to restore it to United --ever. It's a curious move by the pension agency. While only once before has it returned a pension plan to a company that defaulted on its pension obligations, I'm sure today's situation might be the only time a company has been sitting on a host of valuable assets it now wants to spin off and reap billions of dollars in profits from. An embarrassment of riches UAL has been floating the idea of selling its Mileage Plus loyalty program, which one Bear Stearns (NYSE: BSC) analyst has suggested could be worth $7 billion if spun off. It also wants to shed its profitable United Services division -- the maintenance, repair, and overhaul business estimated to be worth as much as $600 million. In total, United might be able to fetch some $16 billion from the noncore pieces it puts up for sale. Considering the PBGC assumed more than $6 billion worth of pension obligations from United, it would be reasonable to ask why the airline shouldn't be responsible for the obligations it shed. Employees were the ones who lost their souls after having worked for decades for the airline to see their benefits slashed. Pilots, for example, who are required by law to retire at age 60, found out that not only would their benefits be cut nearly in half because the maximum the PBGC pays is about $47,000 for someone who retires at 65-- they were penalized again because the PBGC discounts benefits further for those who retire before 65! Talk about being caught between the flames and the fire! Contrast that with the sweet deal chairman, president, and CEO Glenn Tilton carved out for himself. A deal worthy of Mephistopheles If not for its extraordinary waiver guarantee, the PBGC might have returned the pension obligations to United as it did with LTV in 1990, and restored to United's employees the benefits they had worked and negotiated for, and had been expecting. What's not clear is why the PBGC agreed to such a waiver. Was it the money? The PBGC was given a $1.5 billion stake in United when the airline reminted its previously worthless shares, equivalent to 23.4% of all outstanding shares and making it the largest shareholder at the time. The pension agency received 11.1 million shares of common stock and 5 million shares of convertible preferred shares. It's not atypical for the PBGC to get shares in a company whose pensions it takes on, as it allows the federal corporation to recoup some of its costs. A higher calling In Goethe's Faustus, divine intervention at the last moment prevents Mephistopheles from seizing the alchemist's soul. Unless it's found that there was some skullduggery involved in the negotiations between United and the PBGC, it seems it will take divine intervention to make United responsible for its pension obligations. ============ ========= ==== \  United Taking a Flier With Pensions             By Rich Duprey October 4, 2007 12 Recommendations Back in 2005, United Airlines -- later reincarnated as UAL (Nasdaq: UAUA) -- terminated its employee pension plans, creating the single largest corporate pension default in U.S. history. The belief was that it simply had more liabilities than assets and was under bankruptcy protection already. If it was going to emerge from bankruptcy (which it did in February of 2006), it would need to reduce costs further. Putting the federal taxpayer on the hook for the $6.6 billion in pension plan costs through the federal Pension Benefit Guaranty Corporation, or PBGC, was an easy out. It seems, though, that the unions, shareholders, creditors, government -- and, most importantly, the retirees -- got hoodwinked. United had an asset on its books that could have paid for the entire cost of the pension obligations -- and then some -- but according to the financial statements at the time, it was a negative asset, a cost. Only now that United is considering profiting handsomely from those assets, maybe someone should go back and take a look at what was going on -- and make the airline responsible once again for its retirees' benefits. Getting mileage from miles programs Like a number of airlines these days, United is looking to spin off its customer loyalty program to raise money, because these programs are about the only thing making money for the major carriers. Although it's not a stand-alone company reporting results, the Mileage Plus program is estimated to have generated $600 million last year for United, and a Bear Stearns (NYSE: BSC) analyst figures it could be worth more than $7 billion if it's spun off. American Airlines parent AMR (NYSE: AMR) may also spin off its AAdvantage program, as one large investor wants, as a way to better value the two businesses. AAdvantage is the industry's largest loyalty program, followed by Mileage Plus. The airlines sell the mileages to merchants, who in turn use them as rewards for their customers. American Express (NYSE: AXP), Citigroup (NYSE: C), MasterCard (NYSE: MA), and Visa all use mileage programs as inducements for consumers to use their cards. They're so profitable because the airlines sell the miles for pennies, getting revenue up-front, and then the fliers later redeem the points at prices higher than what they probably would have paid for the tickets. It can also take years before they're redeemed, if at all. Ever since Air Canada spun off its Aeroplan loyalty program, the programs have become a hot commodity for the airlines, and a potential quick fix of cash. No accounting for United's plan Yet one has to wonder why United didn't consider the loyalty program back in 2005 when it was putting the onus for paying its retirees onto the government. Look through its annual report for 2004, and you won't find the loyalty program listed as a richly valued asset. In fact, it's not mentioned anywhere at all under assets. United does say it recorded an $840 million liability to account for miles being redeemed in the future, so you'd think that the Mileage Plus program was costing United money. You would, of course, be wrong. In 2005, when Air Canada sold off a 12.5% stake in its Aeroplan loyalty plan for a price that valued the entire frequent flier program at about $2 billion Canadian, United's management must have had a pretty good idea that it, too, was sitting on valuable asset. Putting the toothpaste back into the tube Now United wants to profit from this richly valued asset. I have a better idea: Let's give the pensions back to the airlines, rather than letting them benefit at taxpayers' expense. Executives were granted millions of dollars in stock awards upon the company's emergence from bankruptcy. CEO Glenn Tilton alone received more than half a million shares valued at more than $20 million -- and selling the loyalty program would certainly enhance the stock's value for him and other top executives. Can the PBGC give the pensions back? Sure it can! Under Section 4047 of the Employee Retirement Income Security Act of 1974 (ERISA), the PBGC can order a company to restore its pension obligations when the company's financial health has improved. In fact, it did that with steelmaker LTV back in 1990. It's hard for me to believe that in the year and a half that United has been out of bankruptcy, its loyalty program has skyrocketed in value so much. Instead, this has been a dormant asset that's only now being brought to light, because of the value it can return to current shareholders. Of course, pre-bankruptcy shareholders will realize nothing. Yet if the PBGC is to ensure that current shareholders don't unduly profit at taxpayers' expense, it'll have to move quickly, before the loyalty program is spun off. If the PBGC blithely allows a spinoff to go forward, I'd consider it in default on its obligations -- a situation at least as bad as United's own role in this. FICA Items. In response to the latest URBPA missive concerning claiming the excess fica taxes paid-it ain't all that hard! I just received a nice check from the IRS after following the guidelines laid out by the CPA for RAA (which you can find about half way down on the comments, opinions page of the RUPA web site). Granted it took me half a day to find all the stuff, but it was worth a 4 digit check with interest and I didn't need no stinking tax advisor! Make sure you enclose all the W-2's for the years in which you got non-qualified benefits and copies of all the letters he calls for. I made this statement in section 5 of the IRS form which apparently worked; 5 Explanation and additional claims I retired from United Air Lines in March 1999. UAL declared  bankruptcy  Dec. 30, 2004. As a result, I lost the benefits from the supplemental non-qualified pension plan. At the time of my retirement the value of the supplemental plan was $235,284.86; the FICA tax I paid on that sum was $3411.63 (see UAL letter- exhibit 1& W-2 for 1999- exhibit 2). I am owed a refund for the excess monies I paid, as I will not receive the full value of the supplemental pension plan. United quit paying the supplemental non-qualified plan as of Oct 1, 2005. Up to that time I had received $122,074.68 from the supplemental plan (see enclosed copies of W-2’s - exhibits 3,4 & 5). The FICA tax owed on $122,074.68 would be $122,074.68 x 1.45% = $1770.08 (again, see UAL letter-exhibit 1). Therefore, I am in excess of payment by the original amount paid, $3411.63, minus $1770.08, the difference being $1641.55. I have never claimed the excess FICA tax as a credit on my tax returns. I have requested United to pursue a refund for the excess taxes paid, but they have denied that request (see UAL letter-exhibit 6). I am aware of the three-year time limit on filing claims for refund for the year in which the tax was paid; however, in this case there was no way for me to be aware of the need to file within that time limit, since United had not yet filed for bankruptcy. Therefore, I am filing a claim based on when the plan was terminated rather than when the tax return was filed. Happy Hunting, Bob Johnson	Read on down. From:  Bob Falco On Apr 2, 2007, at 4:11 PM, boomer2993@optonlin e.net wrote: I only have time to say this ONCE. The FICA check that some of us are getting has absolutely NO relationship with the overpayment of Medicare Tax on our imputed lifetime benefits from the terminated non-qualified plan. I ran across this the other day and it seems to be the answer to why some of us are getting this check from good ol UAL: About a year and a half ago your R&I Committee discovered that UAL had been improperly deducting(and paying their share of FICA taxes) on sick and disability pay that employees received fro more than 6 calendar months after the employee ceased active work. By law, no FICA taxes are owed on sick/disability pay after the first 6 full calendar months following cessation of active employment. UAL immediately stopped the FICA tax deduction error of deduction as applicable and this week they notified ALPA that they woul attempt to recoup this money. A letter, dated November 1, 2003, is going out to 4500 affected employees, approximately 587 pilots, who along with United paid FICA tax in error. The Company will be seeeking a refund of FICA taxes paid, for the years 1997 through 2001. The total refund being sought is $3.6million - $1.8 million for the Company and $1.8 million for the 4500 affected employees. The Company will forward the employees' share to the affected employees upon receipt of the refund, and will issue corrected W-2's. After review with legal councel it is the view of the R&I Committee that affected pilots should sign the certification and consent and return the document as indicated. AGAIN, I am not sure the above is the answer but it seems to fit the circunstance. What makes anyone think they matched your Medicare Tax payment in your retirement year and, "After careful consideration United has decided not to pursue the refund of overpayment of their half of the Medicare Tax?" - Quoted from UAL's formal rejection letter for refund of overpayment of Medicare Tax, > Bob Falco FICA NEWS          WHAT A NICE SURPRISE!   But read letter from Bob Falco on for an explanation! "Today, in the mail I received" TWO very large packets of same Corporate stuff, probably because I have a small fractional share somewhere and the original shares they sent that I am waiting to sell at $50. Ya neva know. Also, yesterday, left unopened 'til today, in a regular white envelope with a "window" that showed my name and address, company address, state, and organization (just like the old paychecks), and sure enough, it was a nice 4 digit check from Payroll. Gave me goosebumps all over.   Thanks to those of you who "rattled their cage", it was a refund of "FICA taxes withheld from my checks during the period between 1997 and 2001". It included almost 1/3rd interest from the IRS. Watch out for it, and have a nice day. Denis 4/2/2007 To All: Today I received a check from United. on the old United Paycheck stock with stub giving an explanation of what the amounts represent. It was a check of 4 figures. About 1/3 of the check was for interest and 2//3 was for FICA Refund. The note at the bottom of the stub, verbatim, states: "This statement explains the refunded FICA taxes that were withheld from your checks during the period between 1997 and 2001. The tax adjustment represents your share of interest received from the IRS." Since I was on extended disability during those years (hearing/heart problems), my check appears to confirm what Bob describes below. There was no cover letter of any sort. I'm assuming that my W-2, already corrected once, may have to be corrected again. Are we having fun yet? I don't recall (short memory ?) l that I ever signed a "certification and consent" statement mentioned in Bob Falco's email. Thanks, Bob, for all your inputs to RETUP over the last several months. Your explanations are a great help to all of us. Ron Weber           * * * * * * * FICA Items. I am not sure what year you retired but if you know anybody that retired in 2003, as I did, please let them know that the IRS limit of three years to file an amended return is up this month. My tax man filed an amended return to recover the excess FICA that I paid on the pension that I didn't receive. Beyond the three year point my tax rep says will require an appeal to an IRS board of review stating how the individual was wronged. Anyway I am passing along the message I sent to RUPA to post on their web cite. The editor has chosen not to publish it so anyone you think might be helped by the method of my tax rep is welcome to use it or contact me. Hope all is well on your end. John Myer	FORM  843 INFO This 843 Form is a catch all form for many issues regarding tax abatements. The IRS really has no Form that is tailored to our situation. So, you do the best you can to make the situation fit the 843 Form and hope for the best. What I've done is the following: Line 1: I realize that the form says to prepare a separate Form 843 for each tax period. I did not do this. What I put in line 1 was my retirement date as "from", and 09/01/05 for the "to" date. 09/01/05 represents the last date that a monthly non-qualified payment was paid. Line 3a: check employment Line 3b: check other and specify 1040 Line 4 a & b: nothing entered As you can see the Form 843 is not specifically set up for our claim but that is the route you must go. I have the feeling that a lot will depend on the explanation section line 5. Backing this up with your proper calculations, supplying them with the letter from UAL which explains why the withholding of the Medicare Tax occurred, attaching your W-2 forms from Northern Trust for the UU3 (non-qualified payments made) over the time you collected non-qualified payments. Attaching the W-2 for the year you retired showing the ramped up Medicare Wages (box 5). Attaching the 2006 W-2 which shows the bankruptcy courts ordered settlement for your non-qualified claim (box 11). Finally attaching the rejection letter from UAL. Reference all of this in the explanation section and provide the best Sale Job you can muster up. I think it will all come down to the individual classifiers desk it lands on. Some will pick up the stamp saying Approved and others will pick up the stamp saying Rejected. If you get rejected than process the appeal and eventually you or your representative will have to explain it all over again, possibly in person. Having a complete knowledge of what actually went on with regards to this excess tax that was withheld will go a long, long way if you have to sell this to an appeals panel. I know there are some guys that have claimed to have received their claim. I processed mine shortly after the Supreme Court refused to hear our case. I have said many times that that was the time to go forward with your claim. Claims prior to that date in my opinion were premature. In any event, I have heard nothing from IRS as of yet. I suspect it could take 4 - 6 months before a determination is made. Good Luck with your Claim, Bob Falco From: "Bob Goetz" <bgoetz@cox.net> Add to Subject: [retup] FICA Refund I just received notice from the IRS that the check is in the mail for all that I had filed for. I had sent my refund request in just at the end of last year so it took almost 4 1/2 months to get it. FYI. I had filed it using the help that Pete Sofman provided in message 8165 dated Nov 4, 2006. It appears that all his information was right on target as it worked for me. I looked at IRS form 843 which was revised in November of 2005. It appears to be a catch all form when no others apply. I didn't know there was any IRS form with three numbers <bfg> but you can get it easily online. Since it is a catchall form, I presume that Box 3a EMPLOYMENT was checked and then a big explanation was added in Box 5. I wonder if active consideration means what we think it does. I wonder if Active consideration is about like ALPA and United Airlines ACTIVE CONSIDERATION of our pension plan! JIM MOREHEAD Click on this link for some answers!  FICA Refund August 21, 2007 FICA NEWS  All:  I have just received a 4-figure check for the overpayment of Medicare Tax on our imputed lifetime benefits from the terminated Supplemental Plan. ($695 of which is reportable interest paid by some entity to me.) I followed the advise on the RUPA website from Dan Seiple (Thanks Dan, if you are ever in Washington, D.C., I want to buy you dinner) and filed the Form 843 along with all suggested documentation to the IRS in December 2006. I kept getting letters every 30 days for about three months stating that "The case was being worked." After about 90 days, I called the toll-free number and asked specifically about the case. I was told that since the IRS had not sent me any explanation for that period of time, I was eligible for a free Taxpayer Advocate, who I was put in contact with. She has worked my case for about three months and has been great in keeping me updated. She ended up going through the Cincinnatti region of the IRS and that is where it was resolved in my favor. My advocate told me that she had been told by the IRS that there were "many" pilots in the same situation. I suggest any of you who have not received an adequate answer from the IRS (after filing the package), call them and ask for a Taxpayer Advocate. When one is assigned to you, give them the information about the Cincinnatti region being the region to forward the package. Someone there is on our side on the issue. Regards, John Adams, UALRet    I am not sure what year you retired but if you know anybody that retired in 2003, as I did, please let them know that the IRS limit of three years to file an amended return is up this month. My tax man filed an amended return to recover the excess FICA that I paid on the pension that I didn't receive. Beyond the three year point my tax rep says will require an appeal to an IRS board of review stating how the individual was wronged. Anyway I am passing along the message I sent to RUPA to post on their web cite. The editor has chosen not to publish it so anyone you think might be helped by the method of my tax rep is welcome to use it or contact me. Hope all is well on your end. John Myer

Here is a comprehensive letter from Bob Falco.

We hope it clears up our confusion,

THANK YOU, BOB FALCO   ed.

Ok, Guys, First of all it is very difficult for me to understand that the majority of our group does not even have a clue as to how they were raped by UAL. That being said I will continue on to try to make you understand this FICA thing. This is going to be lengthy as you MUST understand what exactly went on before you should even try to make a claim for any overpayment of Medicare Tax..

Yes, Medicare Tax!!! This has nothing to do with FICA. The two terms are being used in conjunction with one another but they are different. FICA involves Social Security and Medicare Tax involves Hospital Insurance (HI) when one reaches the age of 65.

This all goes back to the ERISA laws which defined "High Compensated Employees". Our legislators created the ERISA laws which defined high compensated employees. Airline pilots exceeded those income levels. Because our annual earnings exceeded those levels our pensions were subdivided into Qualified and Non-Qualified plans. The Qualified Plan or Defined Benefit Plan was the amount that we earned up to but NOT exceeding the ERISA limits. For those amounts we were supposed to received a pension based on years of service, final average earnings etc. That plan was also supposedly backed by the PBGC - HA! I can write an entire diatribe on the shortcomings of the PBGC. That will wait for a later date.

The pension credits that we earned which EXCEEDED the ERISA limits were designated as NON-QUALIFIED benefits. This was a separate negotiated plan with UAL. Other employee groups did not have a plan of this nature as their annual incomes NEVER exceeded the ERISA limits. The Non-Qualified plan or Pilots Supplemental Plan was set up as a DEFERRED COMPENSATION plan with UAL. After we retired we usually received 2 monthly checks. One from the defined benefit plan and one from the non-qualified plan. If you paid close attention to the annual reporting of these plans to the IRS the defined benefit plan was reported to you and to IRS on a form 1099R. The non-qualified plan was reported to us and to IRS on a W-2 form. The non-qualified plan was always considered a deferred compensation plan. The IRS's code for deferred compensation plans differs dramatically from a retirement or defined benefit plan.

The deferred compensation plan (NON-QUALIFIED), according to IRS regulations is not exempt from MEDICARE TAXATION. Now let's go to the year in which you retired. If you look carefully at your W-2 form for the year you retired you will see your total wages in box 1 of your W-2. In box 2 you will have the federal income tax withheld on those wages. In box 3 you will have your SS or FICA wages. In box 4 you will have the SS or FICA tax withheld on the SS wages. Now in each and every year the maximum SS wages changed because of indexing in the tax code. Most pilots always maxed out on their SS or FICA. However, that was not the case with the MEDICARE TAX. Regardless of what your annual income was, you may have maxed out on the FICA tax, but you NEVER maxed out on the MEDICARE TAX. The Medicare Tax was computed as 1.45% of your annual income with NO cieling or limit.

Now let's go back to the year in which you retired. You earned wages

(box 1) for which you paid income tax on, social security tax on and medicare tax on. IN ADDITION because of the IRS regulations governing deferred compensation plans UAL had to make a calculation of what your TOTAL benefits would be from the non-qualified plan for your lifetime. This was called the total imputed benefits you would be paid if you lived until whatever the actuarial table said you would live to. They took that age, then calculated the number of months until you would reach that age. They then multiplied your monthly benefit from the non-qualified plan by the number of months you were supposed to live based on the actuarial table. They then added that number to your earnings in box 1 of your W-2 and arrived at box 5 or MEDICARE WAGES. They then simply multiplied that sum by

1.45% to arrive at your box 6 or MEDICARE TAX . For those of us who collected non-qualified payments before the plan was terminated you will notice that such amounts were always designated as NON-Qualified (W-2 box 11). In as much there was NEVER any additional withholdings for FICA or MEDICARE TAX. FICA was never charged because it was incom considered to be wages from a deferred compensation plan but not EARNED WAGES. Medicare Tax was never withheld because it was withheld for your lifetime in your retirement year. This is the basis for your claim of Medicare Tax Overpayment for which you should be due a refund.

Since the bankruptcy court terminated the non-qualified plan you paid Medicare Tax on what your total lifetime benefits were supposed to be. Since you are no longer receiving those benefits you have overpaid your Medicare Tax. Your claim for refund of overpaiment should be islolated to ONLY this overpayment of Medicare Tax.

It has always been my position that before we could claim this overpayment of Medicare Tax, all legal efforts to restore our pension benefits including the non-qualified plan must have been exhausted. That square was filled legally when the Supreme Court refused to hear our case. For those of us who claimed their overpayment of Medicare Tax before that event their claims, in my opinion, were premature and could be denied by the IRS for just that simple reason. For those who have recovered their overpayment of Medicare Tax, I applaud you for your initiatived. However, you were flat ass lucky and slipped through the net before the IRS knew what was actually going on. I would not spend all of the overpayment you recaptured immediately as when the IRS finally figures out what has gone on they just may ask for the money you recaptured back at a future date.

Now lets get to the claim for the refund of the excess Medicare Tax paid. In your retirement year UAL sent you a letter stating the exact amount or your lifetime imputed benefits along with the Medicare Tax that was to be paid on such benefits. Because of the importance of this letter, I have seen some which were printed on RED or ORANGE stationary. My particular letter was on plain ordinary white stationary but it explained exactly what was going on, what the total of my lifetime imputed benefits were and what the Medicare Tax was based on those imputed lifetime benefits. Depending on when you retired, whether or not you elected the single life annuity or the PLSA or whatever there were different methods that the Medicare Tax was collected. In my case, I elected the PLSA. The Medicare Tax was then deducted up front from the portion of my PLSA that was designated from the non-qualified plan.

In order to calculate your claim properly from the IRS you first have to establish what the total of your imputed lifetime benefits from the non-qualified should have been. If you have the letter I described above you are off to the right start and you should use the figure provided by UAL for which you paid the Medicare Tax on. Most of the group claim they never got a letter. Trust me, you got the letter but filed it accordingly and now you are letterless. The second method of arriving at your total lifetime imputed benefits is to subtract your wage earnings in your retirement year ( box 1 form W-2) from the total Medicare Wages ( box 5 form W-2). This number may not be exactly the number UAL came up with in the letter but it is close enough. Then you must subtract the sum of all of the non- qualified benefits you received starting in your retirement year including the amount from your PLSA if you went that route through 09/01/05. The totals for the non-qualified payments can be found in box 11 of the W-2 forms you received from Northern Trust for each and every year you collected from the non-qualified before its termination. September 2005 was the last payment from the non-qualified. Then finally you must subtract the bankruptcy court settlement for the non-qualified termination. When you are done with all of the subtractions of the non-qualified benefits paid to you from the total imputed lifetime benefits, you then multiply that number by 1.45% and that is the amount of your claim. That sum should be put in box 2 of IRS Form 843. I would follow the advice of the Retirement Advisors as to how to word the explanation of your claim on form 843 and then provide a detailed calculation of the amount you are requesting the refund for overpayment of Medicare Tax. You must also request and get the denial letter from UAL for such claim and include that denial letter with the filing of y! our 843 form. Now if you are done filling out form 843, are satisfied with your explanation and calculations, you sent it off to the IRS. I'd send it return mail registered receipt requested to the same place you file your annual tax filings. In this way you get confirmation that the IRS received it.

I have obtained information which has stated that in a private ruling the IRS has denied such a claim. In all probability it is a denial for one of our guys who jumped the gun and filed prematurely. This is a private ruling and in no way means that it has become law. I am of the opinion that, most if not all, initial claims will be denied and one should be prepared to take it to the appeal level. The most likely reason for the denial will be that you are beyond the 3 year statue for making such claim. Your counter to IRS's position on the 3 year statue at the appeal is that the plan termination date was established by the bankruptcy court to be 12/30/04 and the 3 year window for making such claim will close on 12/30/07 and you are well within the 3 year window for making such claim. Beyond the appeal level is the tax court and one must weigh what is to be gained as to what the costs of going to tax court will be on an individual basis. Simply stated I think the IRS might adopt a strategy of stringing us out rather than paying us what should be our rightful claim for excess Medicare Tax. I have always maintained that we would be better off processing a group claim and have been in contact with URPBPA on this matter. Unfortunately, they have decided not to get involved with this claim and I fully understand why as each and every case is different. We are therefore put in a go it alone situation if we attempt to get this refund. Sooner or later the IRS will figure out what actually has gone on here and adopt a protocall for future claims.

So to summarize: Collect all your W-2's from when you retired thru

2006. Establish what your total lifetime benefits should have been by either using the letter from UAL or your retirement year W-2. Add all of the payments you received from the non-qualified plan after you retired including the non-qual amount from your PLSA if you elected that option. Do not forget to include the bankruptcy court ordered payout for the termination of the non-qualified plan. Subtract the sum of all non-qualified payments from the total benefits you were to receive if the plan was not terminated. Then multiply that number by 1.45% and that is your claim for the overpayment of Medicare Tax. Try to make your explanation, line 5 of Form 843, brief and to the point. Make copies of all W-2's and reference them with the calculation of your claim. Attach the copies of all W-2's to your paperwork. Finally attach the rejection letter from UAL. Sign the 843 form and send it off. Hope for the best but in all probability you just stepped in the ring for a 15 round fight. Decide beforehand just how far you want to continue to fight, and whether or not you want to use a CPA or Tax Professional as a corner man in what will probably develop into a dispute with the IRS.

I processed my claim approximately two weeks after the Supreme Court refused to hear our case and URPBPA decided to not get involved. I collected non-qualified benefits for exactly 1 year after my retirement. My claim worked out to be just shy of $8,000. They can take their private denial ruling and stick it as I will take it to tax court if necessary and will be representing myself.

For all: here are the links to the irs instructions for form 843 and 843 itself:
http://www.irs.gov/instructions/i843/ch01.html
http://www.irs.gov/instructions/i843/ch02.html
http://www.irs.gov/pub/irs-pdf/f843.pdf

Good luck with your claim, Bob Falco

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Sens Urge Action On US Airways' Pension Liabilities

DOW JONES NEWSWIRES

January 30, 2007 6:26 p.m.

By Corey Boles
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--Senators of both parties have urged a federal
agency responsible for failed company pension plans to take action to
force US Airways Group Inc. (LCC) to abandon its hostile bid for rival
Delta Air Lines Inc. (DALRQ) and instead reinstate its company pension
plan.

Several senators Tuesday sent a letter to the head of the Pension
Benefit Guaranty Corp., asking the agency to force the air carrier to
use the money in its takeover war chest to fund the pensions of its
staff rather than attempt to buy Delta.

"If US Airways now clearly has the ability to generate considerable
cash and has easy access to credit markets, the company's ability to
restore its terminated pension plans must be fully explored," said the
letter.

The missive was signed by Sens. Maria Cantwell, D-Wash.; Saxby
Chambliss, R-Ga.; Frank R. Lautenberg, D-N.J.; Johnny Isakson, R-Ga.;
and Patty Murray, D-Wash.

US Airways has twice bid for Delta, which is in bankruptcy protection.
The first attempt was rebuffed and the second, worth around $10.2
billion, is awaiting a response. As Delta is in bankruptcy protection,
it would be its creditors rather than its board who will determine its
future.

Lautenberg argues that $5 billion of the funding is in cash, more than
the roughly $4.8 billion in liabilities the company owed when it
handed off administration of its pension funds to the Pension Benefit
Guaranty Corp.

The PBGC effectively acts as a lifeboat to rescue the pension rights
of certain types of pension plans at failed companies. It collects
contributions from more than 30,000 private sector firms that have
defined benefit pension schemes in place.

If a company argues successfully in court that continuing to struggle
with pension liabilities would prevent it from emerging from
bankruptcy protection, then it can divest itself of those liabilities.

US Airways did so before it went on to merge with America West in 2005
to become the company it is today. It has since returned to profitability.

Last week, at a hearing of the Senate Commerce Committee, Lautenberg
asked US Airways Chief Executive Doug Parker why, instead of pursuing
Delta, he didn't use the money to cover the deficits in the company's
pension scheme.

Parker responded that the bulk of the funding for the takeover wasn't
US Airways money, saying it was contingent funding from backers
Citigroup Inc. (C) and Morgan Stanley (MS).

Gary Pastorius, a spokesman for the PBGC, said the agency had received
the letter but wouldn't comment other than to say it was looking into
the matter.

No one from US Airways was immediately available to comment on the letter.

-By Corey Boles, Dow Jones Newswires; 202-862-6637;
corey.boles@ dowjones. com

Dec 30, 2006

DAL Pilot Retirees Unsuccessful

As most of you know, the DAL retired pilots filed a suit in hopes of reversing the decision terminating the pilot's pension plan. Here is the update after yesterday's hearing:
Well, I guess today was another example of same song, different verse. (Also a case where everyone appeared to have a copy of the songbook except for us.) In case you have not heard this information through the news media, the bankruptcy judge ruled against us on all motions our attorneys brought before the court today. I had a short debriefing from Don Sapir immediately following the hearing and expect a more detailed analysis of the decision later this evening.

The bankruptcy judge also refused our request for a "stay" to prevent the PBGC from assuming custody of the plan, and that step could occur as early as this Friday.

I appreciate all of the support you have provided throughout this effort, and wish we could have achieved a more successful outcome, but Bankruptcy Courts are definitely an arena favoring the debtor. While we believe we raised issues that could have led to a different decision, at least we have now had our day in court.

Dec.5, 2006

Delta wins clearance to dump pilots' pension plan

BY RUSSELL GRANTHAM

Cox News Service

ATLANTA — Delta Air Lines said it reached a settlement with the Pension Benefit Guaranty Corp., clearing the way for the carrier to dump its pilots' pension plan.

The agreement announced Monday, which also clears a major obstacle in
Delta's plans to emerge from bankruptcy next spring, will make the
PBGC one of Delta's largest creditors and potential kingmakers at a
time when Delta is trying to fend off a hostile takeover bid by US
Airways.

As part of the agreement, Delta put in writing for the first time that
it will maintain its far larger pension plan for its flight attendants
and ground employees, including chipping in at least $50 million in
funding before it exits Chapter 11.

Delta said after pension relief was signed into law earlier this year
that it expected to keep the non-pilots' plan in force, but that it
couldn't afford about $2.5 billion in payments needed to bring the
pilots' plan to full funding.

Under the proposed agreement with the PBGC, the quasi-federal agency
will receive a $2.2 billion unsecured claim and, once Delta emerges
from bankruptcy, a $225 million unsecured IOU from the airline.

The agency insures employees' pension benefits up to certain limits,
taking over the assets as well as the obligation to keep paying
retirees' pensions when a pension plan is terminated. Many retired
pilots' pension benefits shrank significantly as a result of the
planned termination because their accrued benefits exceed the PBGC's
guarantees.

The PBGC had filed claims for almost $3 billion related to Delta's
planned termination of the underfunded pension plan.

The airline said in a court filing that without the settlement, its
efforts to file a plan of reorganization would be delayed.

Delta, which has been in bankruptcy almost 15 months, said the
pension-plan termination will become effective Sept. 2 if the
agreement is approved by its bankruptcy judge. A hearing is set for
Dec. 20 in the federal bankruptcy court in New York. Judge Adlai
Hardin ruled in September that the pension termination was necessary
to Delta's survival.

The PBGC typically settles its claims for pennies on the dollar.
However, the market value of creditors' claims against Delta has
soared since US Airways' bid became public on Nov. 15.

"We agreed to the settlement to take care of our unsecured claims,"
said PBGC spokesman Jeffrey Speicher, but he said the negotiations had
been going on for months and that the agreement was "absolutely not"
influenced by US Airways' appearance on the scene.

It's unclear how Monday's agreement might affect US Airways' $8.6
billion bid for Delta. Delta's management opposes the merger proposal,
saying the company will be more valuable if it emerges from bankruptcy
as an independent airline.

Creditors hold considerable power in choosing which restructuring plan
Delta should follow. If Monday's settlement is approved, the three
unsecured creditors — its pilots union, retired pilots and the PBGC —
will hold more than $5 billion in bankruptcy claims, or perhaps 30
percent of the total votes and future stock in Delta.

*    *    *   *

Oct. 26, 2006

Here are the two opinions issued today. The summary is that the
retired pilots lost on the issue of the enhanced benefits to the
active pilots. The plan terminated as of Dec. 30, 2004. The supp
benefits ceased as of October 2005 and UAL gets back the monies it
had been paying into the segregated fund (which will ultimately have
to be distributed to creditors pro rata under the confirmed plan)

Appeals Court Text

Appeals Court II

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From Jim Morehead:   Nov 8, 2006

One of the moderators asked that I make an attempt to tell some why those who were younger (65 and younger mostly) and those who retired early got the basic heavy screw job from the PBGC.

Perhaps George Mathes, Bob Falco or someone with a more dedicated financial background could more eloquently explain it,but this is the street level view.

It appears that all of the appeals are now done and what you see is what you get. The PBGC decided and it was upheld that the date of pension termination was December 30,2004. That was the sate of Pension Termination or DOPT. Your age then was a basic starting point for PBGC benefits. I recall that the approximate protected dollar value for age 65 to be about $45,000. So if you had benefits of about that number and you were 65 at DOPT, you got this amount of money. This is about $3800/month and many of you had benefits up to this.

Retirees pre mid-1990s had most if not all of their pension in QUALIFIED money meaning the PBGC had full control over this. If said pilot was 65 and had nothing to reduce this amount, then would get this amount.

Fortunately or unfortunately, as the contracts and pensions grew, the total amount of money would not fit into the QUALIFIED grouping, so it became NONQUALIFIED money. This NONQUAL money was paid directly out of UAL's treasury and was based on Profits. Eventually those profits ended and the bankruptcy court permitted United to stop paying the NONQUAL money. The PBGC only has jurisdiction over QUALIFIED money and no control over NONQUALIFIED money.

So as the Contract 2000 was signed and the contracts and pensions got larger, the numbers all went up. In the cases of those retired around 2002-3-4-5, these QUALIFIED moneys far exceeded the amounts allowed to be paid. Keep in mind, that the NONQUAL amounts grew larger as there were rules in place in the amount that would ultimately be known as qualified.

SO we the bankruptcy court's kind help, they TOTALLY eliminated the NONQUAL payments. In my particular case the QUALIFIED was 57% of my monthly pension check meaning 43% was taken away immediately. I can't speak exactly for others ,but many of the people that retired in the 2002-3-4-5 range had percentages of 60/40, 70/30, and numbers like this.

So that wouldn't be so bad to only lose 40%. I know some of you are gagging already.But the furlough was VERY significant in those who started in 1969 and namely about April, 1969 through 1971. There were some from the 1978-1979 group that have retired,but it seems to be those prior to 1971 that were hit the worst. Contract 2000 gave us (finally) the full furlough years for A fund credit,but the PBGC did not recognize all of them. I believe there is still a dispute on what they HAVE PAID and I hope someone will jump in.

There have been 570 (1985) and post 1985 pilots who have retired and many have been 60 if they started late in life at UAL. There also with EAL and PAA guys who started post 1985 as new hires at UAL.

Taking the lump sum further reduced the payments to be made. Lump sum payments consisted of QUALIFIED and NONQUALIFIED money. Only the qualified money could be rolled over and the Nonqual money was paid upon retirement. The various lump sums I am familiar with were in the $60K range and up to almost $300K for those who had no furlough time and generally started in the 1960s. Part of that was nonqualified also. But the point I am making is we do not have American's, USAir's, nor Delta's pension plans which had provisions for lump sums over a million dollars. Friends, neighbors, and even some pilots still think that we got some lump sums of this amount and it is FAR FROM TRUE. But it further reduced the PBGC payouts.

I recall that after about 2000, one did not have to retire early (even as early as one month early which some did) to get the lump sum. Most people took the lump sum and that's why many PBGC payments have been reduced. If the lump sum money was kept by the PBGC, then they would pay you more. But I know no one who didn't take the lump sum unless they were in some divorce action or some other reason.

Now let's look at those OVER 65. Many of their $$$ were protected especially those over 70. If I believe United's number some 39% of the pilots did not take any reduction at all.Of course, most of the pensions were smaller. So the rest took increasingly big hits up to about 80%.

The last factor was age and early retirement which go hand in hand. Somewhere in the late 60 age range meant one would not lose money. The number drops off quickly from 65 down. I believe those around 60-62 may receive a maximum of about $3000/month despite the fact that their earned pensions were much higher. Age was a killer factor because the PBGC believe one 60 will receive benefits for 10 more years than a guy 70 and so on.

I receive $2296/month and that is almost an 80% reduction. This is 3 years in the 2000 contract on the 400 with some on reserve and some a lineholder. It should be noted that the 400 pay fell to 777 pay in March, 2003 and all of the pay fell some 50% or so around that time.

Then , of course, the active pilots split up a bond to make up for their difficulties. United somehow found the money for that and the pilots gave in and let the pensions go away with little to no fight. It will be a "me too" through the airline industry.

So I hope that will explain to anyone who doesn't know why some retirees see this as "non problem" and others have taken a final, fatal major hit having worked at United often over 30 years. This was meant to be general and all of the opinions here are mine. This may be of interest to be shared with family and friends who ask, "how could this happen to you and happen in America". Believe me, it did.

No one knew the play would end this way, but it is a reality.

JIM MOREHEAD

---

Good job Jim. The furloughed guys who finally recieved 100% credit in
the 2000 contract were were originally not credited for any furlough
time by the PBGC. John McDannel went to the LAX PBGC road show and
noticed that furloughees should have been credited with 1/3 of their
furlough time in a previous contract and this had been overlooked by
the PBCG.

Thanks to some hard work by John the PBGC finally gave us
furloughees the 1/3 credit. This raised my check by about $300/mo. in
October. We will not receive back pay for the unpaid credit until the
PBGC comes out with the final numbers. At that time many of us will
owe $$ for the overpayments by the PBGC from Jan 05 until Feb 06. I
retired off the 67 in SEA and lost 63%.

Eric Malm

---

Good recap of our Problem Jim, In my case it was a 76% decrease in pension from what United contracted to pay me. It would be interesting to apply a spread sheet of all who are receiving the United pension, now PBGC paid as to years worked and current pension paid.

When I was recalled from furloughs it was brought to my attention that there were those who retired before my tenure who received little or no pension and were receiving hardship benifits from a fund sponsored by active pilots. For years we have supported those hardship pilots. It is ironic that now pilots in my seniority might might have to be put into that same group. It is hurtful to think that many of our good guys now receive an amount that qualifies for food stamp, social security benifits and welfare after retiring from a profession they served faithfully for over 25 and 30 years.

At age 60-70 jobs are available but jobs that can pay the rent are few and far beween. We again as a group need to look after each other and post available jobs though our network whenever we can. My heart goes out to everyone in this financial critical position. Suggest that anyone in dire situation keep a friend posted so that if we can help someone in need we will.

s/f bob beavis

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*    *    *   *

Interesting !  Delta Pilots Pension Deal.

Pension loss jolts some ex-Delta pilots
By RUSSELL GRANTHAM, The Atlanta Journal-Constitutio n
Published on: 10/08/06

Jim Cochran expected bad news when he got the big white envelope from Delta Air Lines. What he found inside was worse.

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.

His benefit had already dropped by more than $3,000 when Delta cut part of the program after flying into Chapter 11 a little more than a year ago.

But Cochran saw two things when he opened the envelope. One was a letter from Delta telling him that, as of Oct. 1, his benefit was zero.

The other: coupons to begin paying Delta $907 a month for his family's health insurance, since he no longer had a pension check from which to deduct it.

"This is absurd," said Cochran, 59, who worked for Delta almost 27 years. "I get nothing, and I still owe them $907."

Delta says about 1,300 retired pilots had their monthly pension checks zeroed out by the pilot pension plan termination.

The reason is more complex than the company's simple need to cut retiree costs. It lies in the arcane rules of pension termination — and in a lucrative feature of Delta's pre-bankruptcy pilot contracts.

Delta says pilots who got zeroed out already took a major portion of their pension benefits when they left the airline. Unlike most employees, retiring Delta pilots until 2005 could cash out half their pension benefits in lump sums that sometimes topped $1 million.
Hundreds retired early to take advantage of the clause before it was stopped after Delta's Chapter 11 filing.

If the annualized value of the lump sum exceeds the federal Pension Benefit Guaranty Corp.'s caps on how much a retiree can still collect from the federal insurance agency after a plan is terminated, a retiree gets no more monthly checks.

"These pension checks are only the remaining portion of their benefit after they took the lump sum," said Rob Kight, Delta's vice president in charge of employee benefits and related matters.

Kight said that while about 1,300 ex-pilots' monthly pension checks were wiped out, a slightly larger number of the carrier's oldest pilot retirees saw no reduction. For an additional 3,000-plus in between, pension cuts range from a few percent to almost 100 percent.

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. Cochran, for instance, hopes to soon begin tapping a $1.2 million lump
sum that he got when he retired almost three years ago and put into an IRA account.

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.

Wendell Lewis, another retired Delta pilot whose monthly pension checks stopped, is part of a group headed by a former pilots union chairman that is appealing U.S. Bankruptcy Judge Adlai Hardin's approval of the plan termination.

"Delta's making enough money to keep the plan," said Lewis. He said Delta has broken its promises to him while maintaining the pension plans of most other employees and retirees.

Indeed, Delta has said it intends to keep a larger pension plan for nonpilot employees. Congress last summer enacted a law giving the airline 17 years — 10 years more than most companies — to bring its plans to full funding. But Delta moved to terminate the pilot plan anyway, and its pilots union had agreed not to object as part of a new contract deal.

"The management didn't take any hits on their pensions. The other employees didn't either. The active pilots negotiated a new pension plan for themselves," said Lewis, 58, who lives in Duluth. "The only ones that are getting their pensions dumped are the retired pilots."

Will Buergey, the former union chairman who is appealing termination, believes most retirees' incomes will be much lower than Delta's estimates.

"My income is substantially lower than $50,000 now," said Buergey, 58, who made more than $300,000 a year before he retired in 2004, just before the first of two deep pay cuts.

Delta says it had to shed the pilots' pension plan to be able to get financing for its planned emergence from bankruptcy next year. Shedding the plan and letting the PBGC take over limited payouts enables Delta to avoid about $2.5 billion in payments needed to bring
that plan to full funding.

"Termination of the pension plan is among the most difficult decisions Delta has had to make in connection with our restructuring process, and we truly regret the impact this has had on you," Delta said in a letter late last month to almost 6,000 retired pilots.

The PBGC caps payouts at $31,000 or less per year for people who retired at 60, the mandatory retirement age for airline pilots. Delta is the third major airline to dump all or part of its pension obligations as part of a recent Chapter 11 reorganization, after US Airways and United.

But Northwest Airlines, which filed for Chapter 11 protection on the same day as Delta, has not moved to shed its employees' pensions.

The PBGC hasn't yet taken over Delta's pilot plan, but the airline was required to recalibrate payouts as if it had.

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.

"Due to the complexity of the calculations, the Employee Service Center will not be staffed to answer questions regarding these calculations, " Delta's letter stated.

Cochran hoped to have enough of a monthly benefit left to cover his family's health insurance premiums. He said he's worried about insurance in the future, because his 57-year-old wife, Susan, has diabetes. 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.

"I can't go [to a new insurer] because of Susan being a Type 1 diabetic. They won't take her," said Cochran.

Still, he is philosophical about Delta's pension-cutting moves. "It will certainly make my income tax a lot easier to figure," he joked. He said he long thought the pension plan termination was inevitable.

"I don't blame Delta. They're trying to survive," he said. "I just knew this was going to be a dead-end battle, which is why I retired."

Cochran said he flew extra trips before retiring, boosting his income to $240,000 a year. The couple paid off their house and cars, and his wife later went back to work.

He said their expenses are less than $10,000 a year now, and they banked nearly $1.7 million when he retired two years ago, including savings from his Delta wages and the $1.2 million pension lump sum.

"I plan to live conservatively and keep our costs down and wait for the dust to settle," he said.

Lewis also retired four years earlier than he had planned, in order to save his lump sum pension benefit, also $1.2 million.

At that time, in late 2004, Delta had just averted a bankruptcy filing, and waves of pilots were retiring. He didn't believe the carrier's pension plan could long continue to pay out lump sums.

"It was just too big a risk," said Lewis. "I felt like I had to do it for my family, even though I wanted to stay and fly."

As he suspected, several months later, the pension plan halted paying out lump sums. More than 2,300 pilots had retired since 2003, draining plan assets.

Lewis initially got a $6,500-a-month pension to support himself, his wife and daughter while he launched a boat appraisal business. But Delta moved quickly to cut pension expenses, winning court approval to stop paying the portion of retired pilots' and executives' pensions that exceeded federal income limits on traditional pensions.

That move caused Lewis' pension checks to drop to $1,700 a month, he said.

Now that income is gone, too, as a result of the pension plan termination. Lewis said his incoming cash will now be about $24,000 a year from the proceeds of a home refinancing and other savings. He's too young to draw Social Security, and he had put the lump sum into an
IRA that can't be reached without penalties for another year and a half.

"We kind of expected that the benefit would go to zero, but it's a shock when that letter shows up," said Lewis. "It's going to be tight living off of no income for a year and a half." In the meantime, he and his wife are considering going back to work or selling their house.

"We'll survive somehow.It's just not going to be as much fun as I thought it would be," he said.

*    *    *   *

---

Sept. 15, 2006

Dear Fellow Screwees:

This is the response I just got from the Democrat Senator in Colorado.

Larry Walters

Dear Larry:

Thank you for writing about the pension plans of United Airlines employees. I appreciate hearing your thoughts.

As you know, United Airlines is an important business in Colorado, in particular Denver. The health and vitality of the airline is of critical concern to me, as this company supports so many Colorado families and communities. Their futures are the futures of Colorado.

I was disappointed that United Airlines was not able to hold onto their pension plan obligations long enough for the Pension Protection Act recently signed into law to take effect.

On that note, Congress must be committed to providing thorough oversight and accountability into PBGC decisions to default company pensions – such as United Airlines. I am committed to this principle. Every step necessary must be taken to ensure companies do not end up in default. Where default is imminent, pension takeover by the PBGC must strictly be a result of last available option.

Thank you again for contacting me with your thoughts and concerns. As the Senate continues to address pension solvency, I will not forget the situation of United Airlines, and their employees who will not receive their full pensions.

Sincerely,

Ken Salazar
United States Senator

*    *    *   *
09-05-2006 1:58 PM

By BARBARA ORTUTAY, AP Business Writer

WHITE PLAINS, N.Y. -- A federal bankruptcy judge on Tuesday approved Delta Air Lines Inc.'s request to terminate its pilots' pension plan.

Judge Adlai Hardin's decision came after a splinter group representing retired pilots formally withdrew its objection to the termination of the plan, which included an option for pilots to retire early at the age of 50 and take out half their entitlements in one lump sum payment.

Delta, the nation's third-largest carrier, must still go to the federal government's pension agency, the Pension Benefit Guaranty Corp., to officially end the plan. At that time, the PBGC will take over the plan and pay pilots reduced benefits. The change would be retroactive to Sept. 2.

Delta said current retired pilots would still receive, on average, about $75,200 a year, including the lump sum payment. It did not provide an updated estimate of how much pilots who retire in the future without a lump sum will get.

The carrier told Hardin on Friday it had no choice but to eliminate its pilots' pension plan if it is to come out from bankruptcy and remain afloat.

In a settlement reached on Labor Day, the group representing about 100 retired pilots agreed to pull its objections to the plan's termination. In exchange, Delta agreed to pay $500,000 to the group, known as DP2, to cover fees and expenses. Also part of the settlement was an agreement from both sides to no longer "criticize or disparage one another."

"I think we would all agree that termination of the pension plan is not a good thing," said Sherwin Kaplan, a lawyer for DP2, at the hearing. The plan's end, he added, will cause "enormous hardships" to the pensioners, many of whom had worked for decades only to see their entitlements cut.

But in the end, DP2 and its lawyers concluded that the group simply did not have the financial resources to successfully battle its termination.

The judge called Delta's evidence and arguments showing that it has no choice but to end the plan "overwhelming." He said he read most if not all, of the scores of letters sent to him by retired pilots opposing the plan's end.

Delta's active pilots have already agreed not to object to the termination request as part of a $280-million-dollar-a-year concessions agreement first reached with management in April.

Termination of the pension plan means the end to the ability of Delta pilots who retire in the future to collect half of their pension benefits in a lump sum. That lump sum drove hundreds of pilots to retire, many of them early, before Delta filed for bankruptcy in September 2005. Delta said that more than 90 percent of its retiring pilots have chosen to take out the lump sum payments.

Because of a liquidity shortfall in the pension plan, the lump sum option has not been available since last October.

Delta says it does not have enough money to cover the pilot pensions. As of July 1, the pilot pension plan was projected to have assets of 39 percent of its current liability _ $1.6 billion of assets versus $4.1 billion in liabilities _ according to a Delta court filing from Aug 4.

Atlanta-based Delta has said it hopes to keep the pension plan for its ground workers and flight attendants, which does not have a lump sum option.

Delta hopes to emerge from bankruptcy protection by mid-2007.

UAL Corp.'s United Airlines, the second-largest carrier in the country, terminated its pilots' pension plan in 2004, while it was under bankruptcy protection. Kaplan had also represented the U.S. Airways retirees. A federal judge upheld that termination in June.

*    *    *   *

Thursday, August 31, 2006

Reported Like its all over at UAL!

Retired Delta pilots fight pension termination

By Harry R. Weber
Associated Press

ATLANTA -- Bankrupt Delta Air Lines is defending itself against objections filed by retired pilots to the company's request in bankruptcy court to terminate its pilot pension plan.

A hearing on the Atlanta company's motion is scheduled for tomorrow. Delta has asked for the plan covering active and retired pilots to end Saturday.

Active pilots agreed not to object as part of a $280-million-a-year concessions package reached in April.

The Pension Benefit Guaranty Corp., the government's pension insurer, has not objected, but says in a filing that Delta should meet strict criteria before the request is approved.

The official committee of unsecured creditors in the bankruptcy case has filed a motion supporting Delta's request to terminate the pension plan.

Delta's effort to terminate its pilots pension plan, which is significantly underfunded, had been expected, as the nation's No. 3 carrier seeks to emerge from Chapter 11 by the middle of next year a leaner airline.

UAL's United Airlines, the nation's No. 2 carrier, terminated pilot pensions when it was in bankruptcy. Delta has said a pension relief bill passed by Congress and signed by President Bush should help it save the pension plan covering employees other than pilots.

Also yesterday, Delta said it made a profit of $69 million in July, its first monthly gain since the company entered Chapter 11.

Delta said in a bankruptcy court filing that excluding reorganization items, it had net income of $99 million in July. Revenue for the 31-day period was $1.7 billion. The net profit for the month was the first since Delta entered bankruptcy in September 2005, spokeswoman Betsy Talton said.

A year ago, Delta said it had a net loss of $41 million in July. It did not list the revenue for July 2005.

Delta has lost more than $16 billion since January 2001.

Delta has promised its pilots a $650 million note if the pilot pension is terminated. Delta also has promised the pilots a $2.1 billion unsecured claim.

But a number of retired Delta pilots have filed objections over the last several weeks to Delta's pension termination request. A group representing more than 100 retired pilots also has filed an objection.

Delta pilots' pension plan in jeopardy

Tampa Bay Business Journal - 2:57 PM EDT Thursday

Delta Airlines is still trying to terminate the pension plan of its active and retired pilots. It has asked the court to make the termination effective Saturday, Sept. 2.

Active pilots are not opposing the termination as agreed to in the settlement with the company signed last April. Both the pension insurer, Pension Benefit Guaranty Corp., and unsecured creditors support the motion to terminate the plan.

Delta (Pink Sheets: DALRQ) is trying to terminate the pension plan as part of its restructuring to emerge from bankruptcy protection in 2007.

Delta has promised its pilots a $650 million note in the event the pilot pension is terminated as well as a $2.1 billion unsecured claim.

Only the retired pilots are objecting to the proposed settlement. There is precedent for the pension dismissal, as United Airlines terminated its pilots' pension when it was in bankruptcy.

If the court in New York approves Delta's request to cancel its pilots' pension, the PBGC would take over the plan and pay active pilots a reduced benefit based on when they retire and other factors, the Associated Press reported. Retired pilots may receive a reduced benefit.

A Delta court filing and the PBGC differ on calculations of how much pilots will receive after termination. A PBGC spokesman said the actual amount of benefits would not be known until after the plan is terminated and that the benefit will depend on individual factors and the limits under the law.

Once the plan is terminated, the company's pilots won't be entitled to the hefty lump sum payments under the existing pension plan, which allows pilots to retire at 50 and receive half their benefits in a one-time payout and the rest in an annuity later. A liquidity shortfall in the pension fund prevented pilots from cashing in their lump sums after Oct. 1, 2005, and the door has not reopened since.
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THE ASSOCIATED PRESS NYTimes

August 22, 2006 Judge OKs Delta Pension Deal With Group
http://tinyurl. com/plulz

WHITE PLAINS, N.Y. (AP) -- A bankruptcy judge on Tuesday approved an
agreement between Delta Air Lines Inc. and a group of retired pilots
that paves the way for the airline to pay $9 million in pension
obligations.

The deal was presented ahead of a hearing that begins next Friday,
when Delta will ask the court to terminate its obligations under
qualified pension plans. The company anticipates heated opposition
from retired pilots who oppose the motion.

The pilots group, the Delta Pilots' Pension Preservation Organization,
withdrew earlier objections to reach a deal with the airline late last
month.

The group, called DP3, represents about 2,850 of 5,300 retired pilots,
a lawyer for the company said. Of those, 3,642 are eligible for
payments from the $9 million fund, which is worth roughly 11.5 percent
of the total value of non-qualified pensions as of last September.

At the Tuesday hearing, Judge Adlai Hardin also heard arguments over a
dispute between Delta and the U.S. General Services Administration
about a bill the agency believed it shouldn't have to pay.

The government asked the court permission to withhold payment of $23.8
million it owes for tickets mostly bought in the fall of last year. It
argued that it should be allowed to deduct that amount from $26.2
million it overpaid for tickets that went unused, mostly in 2001 and 2002.

Pierre Armand, an assistant U.S. attorney in the Southern District of
New York, argued that the Transportation Act supports the government's
right not to pay.

''Delta is asking this court to permit it to violate a federal statute
entitling the government to adjust Delta's present and future bills to
account for the public funds that Delta wrongfully received,'' the
U.S. attorney's office argued in a court filing.

Hardin did not rule on the matter before adjourning.

As part of the pension agreement, the retired pilots also have the
right to pursue an unsecured claim to seek an estimated $75 million,
the equivalent value of pensions accruing at $7 million a month
beginning at the time Delta entered bankruptcy in September 2005.

''The vast majority are very pleased that DP3 was able to get them,
from our perspective, $9 million real extra dollars by virtue of their
tenacity,'' Delta attorney Marshall Huebner said in court about the
retired pilots group's advocacy.

Delta will be helped by a bill to overhaul pensions that was signed by
President Bush on Thursday. Among other items, the new law gives
bankrupt airlines, which have frozen their plans, an additional 10
years, for a total of 17, to meet their funding obligations.

Other airlines that have active plans have 10 years.
============ ========= ========= ======

Delta retired pilots group shifts its stance on pensions

More time sought to study impact of new legislation
By RUSSELL GRANTHAM, The Atlanta Journal-Constitutio n
Published on: 08/22/06

A group representing retired pilots is having second thoughts about
its decision not to oppose Delta Air Lines' plans to terminate their
pension plan.

The group, DP3, asked the federal bankruptcy court to delay a Sept. 1
hearing on Delta's request to terminate the pension plan. The group
argued that it needs more time to study pension relief legislation
signed into law last week that could open a way for Delta to save the
pilots' pensions.

Delta wants to shed the deeply underfunded pension plan effective
Sept. 2, shifting responsibility for further benefit payouts to a
quasi-federal agency.

DP3's motion to oppose the termination came late last week, only days
before a hearing set for today on the group's earlier pact with Delta.
That agreement would have ended the retired pilots' opposition to
dumping their pension plan on the Pension Benefit Guaranty Corp.

Several retired pilots opposed DP3's earlier deal, which will be
reviewed today in U.S. Bankruptcy Judge Adlai Hardin's court in White
Plains, N.Y. Delta's lawyers said all the retirees' objections have
been resolved except that of former pilots union Chairman William
Buergey. He is complaining that Delta's retired pilots will get too
little compensation for lost benefits compared to their counterparts
at United and US Airways, which also terminated pilots' pension plans.

DP3, also known as the Delta Pilots Pension Preservation Organization,
agreed in May to drop most of its complaints against Delta in exchange
for $9 million and an unsecured claim for certain retirement benefits
that Delta stopped paying when it filed for Chapter 11 last year.

However, DP3 decided to renew its opposition to Delta's pension plans
because of a provision in pension relief legislation enacted last week.

"One of the changes contained in its 900 pages of new provisions and
amendments will alter governing pension law dramatically, " the group
said in a court filing. The law, it notes, would ban bankrupt
companies from paying out lump sums to retirees if their pension plan
is underfunded.

That provision doesn't take effect until 2010, but the group said
that, if the hastily drafted bill is modifed through a "technical
correction" or new legislation, it could offer relief to the airline
and its retiring pilots.

Before Delta asked to terminate the pension plan, blocking that
option, retiring pilots could cash out up to half of their pension
benefits as a lump sum typically worth several hundred thousand dollars.

If lump sum payments were prohibited by law, Delta might be able to
meet its pension obligations.

A spokeswoman for Delta said the new legislation may stop lump sums in
the future but not soon enough to solve the carrier's problems.

"We believe that the new pension law clearly does not relieve the
Delta pilot retirement plan of the requirement to make lump sum
payments," said Gina Laughlin, with Delta.

Delta has previously argued that the new legislation would allow it to
preserve non-pilot employees' pensions, but that the pilots' pension
plan couldn't be salvaged because the lump sum feature is too costly.

In its court filings, Delta said if the pension plan is not
terminated, mass pilot retirements this fall could disrupt operations
and cause a cash drain of up to $2 billion. Delta said that threat
will scare off future lenders, wrecking its plans to emerge from
bankruptcy next year.

Find this article at:
http://www.ajc. com/business/ content/business /stories/ 0822bizdelta. html

Aug. 8, 2006 - From Aviation Daily.
Senators Promise To Revisit Airline Pensions After Recess:
By Adrian Schofield

 Senate leaders last week vowed to return to the airline pension debate after the August recess, allaying concerns from some Senators that the pension legislation passed late Thursday night gives an unfair advantage to Northwest and Delta.

 The pension bill passed 93-5 on the Senate floor late Thursday night, and Republican leaders were successful in preventing any amendments to the bill. This was considered crucial by supporters of the bill, because any amendments would have caused significant delay as the legislation would have been sent back to the House for their approval after the August recess.

 The bill allows airlines with frozen pension plans -- such as Northwest and Delta -- to amortize pension deficits over 17 years, and also lets them assume an interest rate of 8.85% to calculate returns. Airlines that do not freeze their plans are allowed a 10-year amortization, just three years more than current rules allow. Northwest warned it needed the pension bill passed before the August recess.

 American and Continental supported the pension bill but argued they should be given the same relief as carriers that have frozen their pension plans. The two carriers garnered significant Senate support for their position, and this threatened the swift passage of the pension bill.

 However, an informal agreement worked out during floor debate caused most of the dissenting Senators to withdraw their objections. "Although we are not in a position to amend the bill before us, I can promise the Senators that I will continue to work with them on this issue after we return from the August recess," said Senate Majority Leader Bill Frist (R-Tenn.). He added that "this issue needs to be reviewed further this year to assure an equitable result."

 Congressional sources told The DAILY that changes to the pension bill will be handled either with a technical corrections bill or an amendment to must-pass legislation such as an appropriations bill. Sen. Kay Bailey Hutchison (R-Tex.) indicated the disparity in the interest rates is the biggest concern. American and Continental would have to use the corporate bond yield -- about 6.2% -- to calculate returns and would have to pay hundreds of millions more than Delta and Northwest, she said.

 Will Ris, American's Senior VP-Government Affairs, said the carrier was "pleased to see many [Senators] strongly urge that the disparity in treatment among airlines be addressed upon the return of Congress from the August recess...there is significant consensus in both the House and the Senate that the discount interest rate applied to airlines should be more fairly equalized." Delta and Northwest praised the Senate for passing the bill without amendment and urged President Bush to sign it quickly

AMR may ask for freeze

By TREBOR BANSTETTER STAR-TELEGRAMSTAFF WRITER

American Airlines could soon be facing intense pressure to freeze its pension plans if a bill approved last week by the U.S. House of Representatives becomes law.

The measure, which has not passed the U.S. Senate, would grant American some reprieve from its pension obligations, which cost airlines hundreds of millions of dollars a year.

But it would give bankrupt rivals Northwest Airlines and Delta Air Lines even greater relief, handing them a significant financial advantage.

"It's really a double standard," said airline analyst Henry Harteveldt of Forrester Research in San Francisco. "You have to ask if it's fair to penalize airlines who have run their businesses better and stayed out of bankruptcy."

American officials declined to comment on the bill, pointing out that the situation could change as the Senate considers the measure this week. But American's interest in the pension issue is acute. The airline could be in an even more difficult position if a bill fails to pass, because it could have to pay more than $1 billion into the plan next year.

"This is a very complicated, very important issue for American Airlines and its employees," said Gregg Overman, a spokesman for the Allied Pilots Association, the union that represents American's pilots.

Sen. John Cornyn, R-Texas, told reporters Monday that he was concerned about the bill, which on the Senate side is part of a larger tax package. "The pension part of it treats airlines that have avoided bankruptcy disadvantageously, primarily Continental and American Airlines of Texas, and helps those who have declared bankruptcy," he said. That "just goes to prove that in Washington, if you're not careful, no good deed goes unpunished," he said.

Cornyn said he hasn't decided whether his pension concerns will be strong enough for him to vote against the entire tax package.
American, like other airlines and large companies, has substantially underfunded its pension plans.

Depending on how it's accounted, according to the airline, the shortfall is either $2.3 billion or $3.2 billion.
American has kept its pension plans intact despite its financial squeeze in recent years, as has Continental Airlines of Houston.
Other carriers, including Delta Air Lines and Northwest Airlines, have frozen their plans. That means they will pay employee benefits that have already been earned but will no longer allow workers to accrue retirement allowances. Employees at those airlines have been shifted to defined-contribution programs such as 401(k) plans.

United Airlines and US Airways, which have both gone through bankruptcy, terminated their plans entirely, handing them over to the federal government to administer.

In 2004, Congress granted the airlines a two-year respite from having to pay off their shortfalls. That will expire at the end of this year, and if pension rules aren't revised in the meantime, American will have to fund some of its obligation next year.
That would mean a significant financial hit on a company that is struggling to return to profitability after losing nearly $8 billion since 2000.The House bill approved last week provides some breathing room, allowing American and Continental to fund their pension programs over 10 years.
But the law gives Northwest and Delta 17 years and gives them a friendlier way to determine their total obligations.
American and Continental could get the same benefit if they freeze their plans before December 2007, according to airline analyst Jamie Baker of JPMorgan Securities.
Baker predicts that if the law passes, American will ask its employees to agree to freeze the plan. Under union contracts, workers must approve any changes to the pensions. American's contracts expire in 2008.
"This implies management must seize the next 17 months to bring labor to the table prematurely and sell the need for pension parity," Baker said in an investment report Monday. That has union officials worried.
Overman of the pilots union said maintaining the pension is a crucial issue for that work group. The pilots' approval of concessions in 2003 "was predicated on the notion of preserving the pension," he said. Analyst Harteveldt said the next few days could be key. The Senate breaks for its August recess at the end of the week.

Staff Writer Dave Montgomery contributed to this article.

WHY SHOULD I CARE?

Congress is considering whether to grant pension-funding leeway to American Airlines and other carriers. Here's how it could affect you:
If you work for American, you could see your pension benefits frozen. Such a move would have to be approved by unions first. The airline would be under intense competitive pressure.
If you travel, you could see higher fares if American isn't granted any pension reprieve. The huge financial obligations would drive the airline to bring in as much money as possible from customers.

If you're a taxpayer, you could have to pay for a bailout of the federal Pension Benefit Guarantee Corp. if Delta and Northwest airlines terminate their pension plans. The agency pays for abandoned pensions through corporate fees, but it is strained, and an infusion of taxpayer dollars could be required in the future to keep it afloat.
Trebor Banstetter, (817) 390-7064 tbanstetter@star-telegram.com

Airline Pensions: a Vanishing Act? 

  Friday July 28, 2006 7:03pm 

 Washington (AP) - Only two major airlines — American and Continental — have active defined-benefit pension plans, according to a June report by Congress' Government Accountability Office.All other major carriers have either terminated all or some of their defined-benefit retirement plans and turned their assets over to the Pension Benefit Guaranty Corp., the government agency that insures pension benefits, or have frozen their plans and quit making contributions, the GAO said.

 When a plan is frozen, no more benefits accumulate for its participants, but assets and liabilities can change.

Delta Air Lines Inc. has frozen all of its pension plans. Delta says its pilot and non-pilot pension plans are underfunded by $6.37 billion. The PBGC estimated in September that Delta's pensions are underfunded by $10.6 billion. Delta has notified PBGC that it intends to terminate its pilots' pension plan as of Sept. 2. A bankruptcy court would have to approve that. Delta has lobbied for the pension bill in Congress, but has offered no assurances it will maintain its non-pilot pension plans if the bill becomes law.

 Northwest Airlines Corp. has frozen its pension plans and reported that they are underfunded by $3.7 billion. The PBGC estimated last September that Northwest's pension plans were underfunded by $5.7 billion.

 Continental Airlines Inc. reported at the end of 2005 that its pension plans were underfunded by $1.2 billion, an amount that decreased from $1.6 billion the prior year. The airline has frozen its pilots' pension plan.

American Airlines, a unit of AMR Corp., reported that its pension plans were underfunded by $2.3 billion as of Dec. 31, 2005.

 Continental and American haven't filed for bankruptcy and PBGC hasn't publicly estimated their pension liabilities. A PBGC estimate of a plan's underfunding normally doesn't become public until the agency files a claim in bankruptcy cases.

 Two carriers —