PBCG and other Pension Termination News
The Quick Table for PBCG calculations is still here at the end of these postings and on the adjoining link "Table with small revisions" ed: AvN
United Taking a Flier With Pensions
Part III Pension Discussions
Here is the latest committee effort to determine the facts. Attached is the Agreement between the PBGC and UA this is the SEC filed copy. This is the same agreement that has the famous "waiver"clause. These new pieces of this puzzle seem to make the "waiver" clause pale in comparison.
Read in the agreement to paragraph 13, titled;
Release and/ or Assignment of Claims. At United's option, PBGC shall assign 45% of the distribution that it receives or is to receive on account of its claims in the Chapter 11 Cases as directed in writing by United.
It is the committees belief, Apparently UA executives knew exactly what this meant. Go to UAL.COM press the button on the bottom Investor Relations. There is a PODCAST noted there ("Goldman".. . Nov 7th replay. )
Click on to listen to this PODCAST and move the presentation forward immediately to about 25 min. (copy if you can because it will be gone soon). It is illegal to copy and distribute just copy to listen to.
Wait for an exchange where the moderator says, " Oh we have a question" . The person asks a United Executive making the presentation, about the plan to pay shareholders a special dividend . The executive responds that they can not due to Loan covenants however, he then says we do have another way to make this happen and that is "our PBGC Convertible Notes investment?.
It is the committee's belief he is referring to this aforementioned release/assignment clause.
The clause which amounts to 45% of $1.5B given to the PBGC or represents almost ($600 M) slush fund. This is the only thing he could be referencing.
Lets hope the committee is wrong and the PBGC and UA did not conspire to move money away during the BK exit and intended all along to use these funds to enhance share holder value as the UA executive states in the PODCAST.
The Committee for the Restoration of Pensions at United Airlines 2007
From: "Proctor Lucius" < pwlucius@gmail. com <mailto:pwlucius@gmail. com> >
Date: November 12, 2007 8:53:04 PM PST
To: "'Harry Stonelake'" < stonelake@comcast. net
<mailto:stonelake@comcast. net> >
Subject: RE: FWD// 600 mil slush fund...??
Here is is a copy of a letter from the PBGC in response to a letter
requesting the PBGC give back our pension to UAUA now that they have over 7
billion in the NEW found asset the Mileage Plus Program.
Note the ref. to the NON REVOCABLE attitude of this secretaries surrogate of
Director Charles Millard in her response that I have attached. Millard has
never responded to my letter engaging the PBGC in their quirky application
of their age 60 penalty of Airline Pilot retirees either. No surprise here
either as I think this Bushbaby appointee is on his way soon to manage some
hedge fund after he Invests large sums of our retirement funds in that very
hedge fund or wall street rat hole. No surprise to me if that happens.
The response below is actually miscued by this PBGC surrogate, as she is
talking about the letter I sent to the Secretary of Labor at Dan Handleys
request for the PBGC to give back our pension to Ual not the one attached to
her response. Screwed up indeed they are. I am formulating a response as
soon as I get some other information.
For Now,
PW.
************ ********* ********* ********* ********* *******
Dear Mr. Lucius:
I am writing in response to your communication of email in which you asked
PBGC to consider giving back or restoring United Air Lines' terminated
pension plans. The unique facts of the United plan terminations make that
unattainable, however.
As you may know, on April 22, 2005, during United's Chapter 11 bankruptcy
proceedings, PBGC and United entered into a comprehensive settlement
agreement that sought to resolve all outstanding issues between them related
to United's pension plans. This settlement agreement was reviewed and
approved by the Bankruptcy Court overseeing United's bankruptcy and, on
appeal, by the U.S. District Court in Chicago and the Seventh Circuit Court
of Appeals.
The settlement became an integral part of United's Plan of Reorganization,
which was approved in early 2006 and allowed United to emerge from
bankruptcy as a stand-alone, operating airline. Among many other terms, the
settlement was conditioned on United's pension plans being terminated and
taken over by PBGC. And during the settlement negotiations, United informed
PBGC that the airline likely would not be able to attract the financing that
it required to emerge from bankruptcy if there was a risk that the pension
plans could be restored. Because PBGC believed, as did all the other United
stakeholders, that a reorganized United was more beneficial to all rather
than a liquidation, PBGC agreed in the settlement to waive its right to
restore the terminated United plans. Therefore, restoration is no longer an
option with respect to the United plans.
I appreciate the time you have taken to express your concerns about the
United pension plans. PBGC deeply believes in providing fair and transparent
service and we will continue to do so throughout this process.
Sincerely,
Stephanie Vail
Problem Resolution Office
************ ********* ********* ********* ********* ********* ********* ********* *
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.
============ ========= ====
From: DHWilsman@aol.com [mailto:DHWilsman@aol.com]
Sent: Sunday, July 29, 2007 9:25 PM
To: clifford@sanderson.net
Cc: DHWilsman@aol.com
Subject: PBGC's Formal Determination
Cliff:
On July 27th, I got my "notice of final determination" in the mail from our friends at the PBGC in Florida. I am one who is suffering no reductions for life.
This notification is earlier that the estimated 3-year-after-the-termination-date that PBGC told us it would likely take when they first seized our plan----3 years would be December 30, 2007.
If they are walking in the footprints of the US Airways example, they will issue letters to the easy ones first and then take as long as 9 months later to get through all the difficult one. Roger told us that he would save some energy and money to help us if we think PBGC did something wrong. Now it is time to take him up on it, if anyone has questions.
I always read your stuff. Thanks for keeping on and for keeping me on your list.
Doug Wilsman, 7-29-07
The following was forwarded to us by HNL retiree Jim Sorensen.
More information about this Senate Bill S-1270, introduced May 2,
2007, can be found at:
www.govtrack. us/congress/ billtext. xpd?bill= s110-1270
and at http://tinyurl. com/2n73wv
The text of the bill is appended below. Note the Effective Date below. This seems to say that it could affect our future payments from the PBGC!
Pete Sofman
============ ========= ========= ========= ========= ==
Very Important to Pilots Who Have or Have Had a Defined Benefit
Pension..... ....
Ladies and gentlemen of all the things you do in the next few days
this could be the most important. This is a draft of a letter to be
sent to Washington requesting Sen. Isakson support the Akaka Amendment.
Please, PLEASE, PLEASE, TAKE THE TIME TO ADAPT THE LETTER TO YOUR
PERSONAL SITUATION AND GET IN THE MAIL! A hard copy by mail or fax,
an email and a follow-up phone call may take 30 mins of your time.
The Akaka Amendment is designed to end the penalty, the PBGC currently
imposes, on pilots forced to retire at age 60. The amendment is
extremely important for pilots at US Air and UAL........ BUT the time
could come when it is important to AMR, CAL and/or NWA. (I don't know
if it will effect any DAL pilots at this time)
Age 60 vs. Age 65 is a separate issue. Regardless of your thoughts on
that battle you must take the time to be heard on this issue! Again,
take the following letter and adapt it for your personal situation or
draft one of your own ---------- JUST DO IT!
Take the opportunity to enlist the help of friends and family, educate
them on the injustice of this penalty and ask them to help with a
letter or call of their own.
DO NOT UNDERESTIMATE THE SIGNIFICANCE OF THIS ACTION...... ... IT COULD
MEAN A RAISE OF AS MUCH AS $15,000 A YEAR, FOR THE REST OF YOUR
RETIREMENT!
May 22, 2007
The Honorable Johnny Isakson
U.S. Senate
120 Russell Senate Office Building
Washington, DC 20510
Dear Senator Isakson,
I am a pilot for US Airways and a member of the Air Line Pilots
Association (ALPA).
As you probably are aware, I lost most of my retirement income due to
US Airways shedding its retirement liability as a part of the first of
two bankruptcy proceedings from which the company has emerged. US
Airways' management stated it had no option but to shift employee
pension liability to the PBGC. The reasons for this decision included
chronic under-funding allowed by pension regulations and creditor
demands for providing exit financing to allow an emergence from
bankruptcy.
This action has resulted in a very large decrease in the income I will
receive in retirement. To make matters worse, the PBGC calculates the
payable benefit based upon a "normal" retirement age of 65. Retirement
earlier than 65 causes further reductions to the already-severely
reduced retirement benefit. Since airline pilots currently have to
retire at an FAA-mandated age of 60, every one of us who retires at
our imputed "normal" retirement age is hurt with this additional
reduction. This is simply not fair.
The PBGC knows that airline pilots currently have to retire at 60. In
the unlikely event that they did not know this when they accepted the
premiums paid to insure the pension plan, they certainly knew it when
they assumed control and acquired the funds present in the pilot plan
at the time of plan termination. On the date of the US Airways plan
termination (March 31, 2003), there were approximately 1,300 retired
US Airways pilots—630 were age 65 or over, 400 were over age 60 but
under age 65, and 270 were under age 60. (These numbers come from the
ALPA International Retirement and Insurance office.) Approximately
1,100 US Airways pilots are scheduled to retire at age 60 over the
next five years.
This "insult added to injury" must be corrected. It is important to
note that US Airways pilots are not alone in this situation. Pilots
from other airlines have also been impacted by this PBGC
interpretation and "blind spot."
There was an attempt to correct this injustice in the last Congress.
Senator Akaka and Representative Miller introduced identical
legislation, which would have forced the PBGC to use the current
mandatory retirement age for pilots (age 60) as the baseline for
calculating the retirement benefit payable to the pilot from the PBGC.
This language was included in the pension bill, which was passed but
was removed by the previous Congressional leadership at the last
minute. Despite strong efforts by Congressman Miller and others, this
unfortunate action could not be reversed.
I know you want to help the US Airways pilots recover some, if not
all, of our pension as attested to by the joint letter you signed
January 29, 2007, along with Senators Lautenberg, Cantwell, Murray,
and Isakson. I ask that you support S-1270 and jointly pursue passage
of this important bill.
ALPA's President, Capt. John Prater, has made this a top priority, and
addressing this inequity would help many retired pilots, as well as
those who will retire in the future.
Please feel free to contact me if I can provide you with additional
information. I appreciate you and your staff taking the time to
consider helping in this important matter.
Sincerely,
**** Please remember to proof the letter after you make your changes.
============ ========= ========= ========= ===
Legislation > S. 1270 (110th U.S. Congress: 2007-2008)
S. 1270: A bill to amend title IV of the Employee Retirement Income
Security Act of 1974 to require the the Pension Benefit Guaranty
Corporation, in the case of airline pilots who are required by
regulation to retire at age 60, to compute the actuarial value of
monthly benefits in the form of a life annuity commencing at age 60.
S 1270 IS
110th CONGRESS
1st Session
S. 1270
To amend title IV of the Employee Retirement Income Security Act of
1974 to require the Pension Benefit Guaranty Corporation, in the case
of airline pilots who are required by regulation to retire at age 60,
to compute the actuarial value of monthly benefits in the form of a
life annuity commencing at age 60.
IN THE SENATE OF THE UNITED STATES
May 2, 2007
Mr. AKAKA (for himself, Mr. KENNEDY, Mr. INOUYE, Mr. OBAMA, Mr.
DURBIN, Mr. HARKIN, Mr. SALAZAR, and Mr. ISAKSON) introduced the
following bill; which was read twice and referred to the Committee on
Health, Education, Labor, and Pensions
A BILL
To amend title IV of the Employee Retirement Income Security Act of
1974 to require the Pension Benefit Guaranty Corporation, in the case
of airline pilots who are required by regulation to retire at age 60,
to compute the actuarial value of monthly benefits in the form of a
life annuity commencing at age 60.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Pension Benefit Guaranty
Corporation Pilots Equitable Treatment Act'.
SEC. 2. AGE REQUIREMENT FOR AIRLINE PILOTS.
(a) Single-Employer Plan Benefits Guaranteed- Section 4022(b)(3)
of the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1322(b)(3)) is amended by inserting at the end the following: `If, at
the time of termination of a plan under this title, regulations
prescribed by the Federal Aviation Administration require an
individual to separate from service as a commercial airline pilot
after attaining any age before age 65, this paragraph shall be applied
to an individual who is a participant in the plan by reason of such
service by substituting such age for age 65.'.
(b) Aggregate Limit on Benefits Guaranteed; Criteria Applicable-
Section 4022B(a) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1322b(a)) is amended by adding at the end the
following: `If, at the time of termination of a plan under this title,
regulations prescribed by the Federal Aviation Administration require
an individual to separate from service as a commercial airline pilot
after attaining any age before age 65, this subsection shall be
applied to an individual who is a participant in the plan by reason of
such service by substituting such age for age 65.'.
SEC. 3. EFFECTIVE DATE.
The amendments made by this Act shall apply to benefits payable
on or after the date of enactment of this Act.
============ ========= ========= ========= ======
Following is a reply from the PBGC to an Email I sent them .
Thank you for contacting the Pension Benefit Guaranty Corporation, (PBGC).
PBGC does not provide pay statements monthly. We only provide a statement for the first payment we make to our participants or if there is a change in their payment. Pay statements were sent out this year because the IRS made a slight change in the 2007 tax table, thereby creating a slight change in federal tax withholding.
If you need further assistance, please do not hesitate to contact us using one of these methods:
* By telephone - (800) 400-7242 (toll-free) between 8AM and 7PM Eastern time - Monday through Friday. TTY/TDD users - call the federal relay service toll-free at (800) 877-8339 and ask to be connected to (800) 400-7242.
* By e-mail - mypension@pbgc. gov
* By writing to us - PBGC. P.O. Box 151750, Alexandria, VA 22315-1750
Sincerely,
Pension Benefit Guaranty Corporation
I am a retired United Airlines Pilot receiving PBGC payments. My qustion is --will I receive a 2007 one time only payment statement for January 2007 like I received in January 2006? Robert L. Burns, 770 Gilbert Hwy, Fairfield, CT 06824-1645 -- PBGC RE: PLAN 19912600
Account ID PBGC1--199627. (See attachments of my previous PBGC Statement) Thanks, RLB
Dan Hanley wrote to Jim Hosking:
Jim,
Were you aware that the PBGC could restore a pension once a company returns to profitability?
Dan (Hanley)
------------ --------
Jim replied to Dan:
Oh yes, BUT United forced the PBGC into signing an agreement that United would NEVER be asked to take the pensions back in exchange for $1.5 billion.
We are working on this.
Jim (Hosking)
Jan 15, 2007
From: Capt. Ron Blash.
Dear Fellow Retirees:
This letter will summarize our findings and conclusions regarding the issue of whether the release and exculpation provisions given to ALPA in the UAL reorganization plan should be challenged in the US Supreme Court.
First, a quick glance at the criteria the Supreme Court uses in evaluating a case for possible review. "The Supreme Court is extraordinarily selective in the kinds of cases it hears. The criteria for review are well known among Supreme Court practitioners, but not widely understood by those seeking Supreme Court review, contributing to the large numbers of denials of requests for review. In fact, every year the Supreme Court receives more than 8,000 requests for review, but hears only about 80. The most important criteria for Supreme Court review is a 'circuit split.' the Supreme Court almost never hears cases to correct errors in the factual findings of judges or juries or to review whether a court properly applied settled law . . ." (see www.howerssell.com for further information)
Second, URPBPA's response to our inquiries concerning this issue was explained on their website 12/21/06. Given URPBPA's decision not to appeal the ALPA release provisions, we looked into the possibility of pursuing a separate appeal (as individual members of the association) under Rule 12 of the Supreme Court rules. Professor Brubaker agreed to write the petition if we retained a law firm that would do the actual filing for us and act as attorney of record. He also would have attempted to engage professors and students enrolled in the LLM/Bankruptcy program at St. John's University in New York to write amicus briefs in support of our position challenging the non-debtor releases given to ALPA. To that end, we approached several Washington, D.C., law firms who specialize in Supreme Court appeals. Their opinions were that the issue of non-debtor releases is certainly ripe for review by the Supreme Court given the "circuit split." However, the difficulty with our particular case was that there was no ruling entered by Judge Posner on this issue. There was no request for a rehearing by our URPBPA’s attorneys in an attempt to obtain a ruling, since, presumably, they felt that there were no claims against ALPA to be pursued? Without a ruling by the Seventh Circuit Court of Appeals, the chance of an appeal being granted by the Supreme Court is remote. Therefore, we can no longer recommend pursuing this course of action.
Third, the UAL reorganization plan is available on the Poorman-Douglas
www.poorman-douglas.com website for your review. The following definitions included in Article I are of particular interest: 19 (ALPA Released Party), 87 (ESOP Committee Member), 90 (Exculpated Party), 202 (Released Party) . . . and Article X: G (Exculpation), H (Releases), J (injunction). These provisions in the UAL reorganization plan can no longer be challenged. The protections given to ALPA are intact unless gross negligence, willful misconduct and/or bad faith can be proven in any future litigation against the union
Where do we go from here? We will be focusing our efforts on the legislative front. The battle for 100% of our earned pension money is not over. We will need all of you to support this cause going forward. Thanks to all for your confidence and trust in our efforts to "leave no stone unturned!"
Ron Blash and others
PS Please Forward to other UAL Pilot Retirees
More PBCG Stuff.
Dec. 19 2006
From Bob Beavis:
It is and was my understanding that one or more defined pension benefit
plans from companies that sent their plan to
the PBGC were allowed to sue, fight for and reinstate their plan when the
parent company became well. My question : is there any chance that United might be getting strong enough
financially that we should be looking into reinstating our pension?
Carrying this thought further: perhaps we should be enlisting cooperation
from ALPA National and the MEC for assistance rather than venting or emotions and rightful ascertains against them.
Remember United won because of the split and divide tactics they used to perfection. My thought is that we now need
to re-group and focus on our joint goal. Bring in all the other United unions and divisions that lost their pension and
everyonefight for the same goal.
Perhaps there is someone smart enough to comment on this question.
S/F bob beavis
ALSO:
Back in February we attended the PBGC informational meeting in Fort Lauderdale. We all received a blue booklet outlining what to expect from the PBGC. My blue booklet is gathering dust in Florida while I am currently in NJ. They also put on a reasonable show but no speaker was distracted from their canned speech. Questions were reserved for the period that followed all speakers. I asked the following questions:
1. furlough time was not figured into the equation even though some of us received 1/3 credit for furlough time prior to the 2000 contract. They took this note down and asked to speak to me after the seminar closed. We spoke and they requested I follow up with formal request citing chapter and verse. I did and eventually received a new print out of benefits which enhanced my monthly wealth by a few dollars. Hopefully all those in my situation also received increased rightful benefits.
2. Requested to know what will happen to the monies that UAL paid the PBGC in the form of stock. They again briefed me after the meeting that all monies would be accounted for and the new total would reflect in our update of benefits in approximately three years.
3. The feds capped the defined pension benefit to a max amount of earnings per year. The PBGC used the 160,000 cap which was true for some years but then was enhanced for future years. In my case the 160k was good for look back years 2 & 3. However, the first year look back was capped at 170,000 (or 180k - have forgotten). When asked why the PBGC did not follow the IRS rules for all years they were surprised that they might not have figured correctly. The PBGC told me to put it in a written request and that in three years they would make it accurate and provide corrections.
4. I asked one last question: what happens if UAL becomes strong after bankruptcy and is flowing with cash. Has there or is there a provision to return the pension back to UAL to continue as originally contracted. Their reply was that it is possible and has happened. I believe they told me in private that two companies had actually done just that.
However, by telephone today I spoke with a senior PBGC representative and was told only one Company in the past actually took the defined pension benefit back and then continue to pay the contracted pension. It was LTV Steel. Eventually LTV went bankrupt again and the pension was once again passed back to the PBGC.
Because of that experience they told me today that they, the PBGC, will not entertain the idea of giving back the pension to any original Company no matter how well off that Company may have become.
It would seem to me that precedent has been set and there may be room to pursue a legal argument. Perhaps a request for summary judgment or other judgment might be in order to see if the precedent might fit our case. I am passing this epistle on to you not to create false hope but to show others that the PBGC is not infallible in following their own rules or rules set by the Government. It behooves each of us to make sure our figures are correct when the three year statement appears. It would also be prudent for every retiree and those who are close to retirement to band together as unity will benefit us all.
Merry Christmas and good luck.
Sent: Thursday, December 14, 2006 12:58 PM
Subject: Fellow UAL Retired pilots
Dear Fellow Retirees:
The United Retired Pilots Benefit Protection Association (URPBPA), an organization created to fight the unjust theft of our pension
benefits, has apparently decided not to appeal the failure of the 7th Circuit Court of Appeals' recent decision (10/25/06) to address and
disapprove the UAL reorganization plan's release of liability
provisions regarding ALPA.
WE BELIEVE THIS IS WRONG. The release of liability provisions for ALPA in United's bankruptcy exit plan should be challenged in the
petition for review to be filed in January of 2007 with the Supreme Court. Such provisions have not been allowed in other federal
jurisdictions and solid arguments could be made against these releases being valid in our case.
We believe that URPBPA should immediately retain Ralph Brubaker, a University of Illinois law professor, as a consultant and co-council
to thoroughly review and assist our existing legal representatives to organize the entire Supreme Court petition on behalf of the retired pilots. He is considered one of, if not THE, leading bankruptcy scholars in the country, having written extensively on the issues we are attempting to appeal. His 18 pages CV/resume may be read on the web link below. He has agreed to help us if URPBPA arranges for his retention. The addition of Ralph Brubaker to the Supreme Court effort would give us instant credibility and greatly enhance the probability that our petition would be granted by the Supreme Court. We do not wish to undermine the efforts of our present legal team; however, we assert that additional expertise and assistance is needed. We cannot afford to miss this opportunity . . . it may be our last.
Should we prevail on appeal concerning the releases given to ALPA, then further litigation can commence in state and/or federal courts
outside of Chicago and the 7th Circuit to deal with ALPA' negotiations regarding our defined benefit plan.
All retired pilots and URPBPA members should encourage the organization to solicit Professor Brubaker's assistance. (Do not
contact Professor Brubaker directly.) This may be our last opportunity to undo the unjust taking of our pensions.
http://www.law. uiuc.edu/ faculty/document s/vitae/rbrubake .pdf
Sincerely,
Ron Blash
Barry ButlerNov 20,2006
From: "Denis O'Malley" <dj.omalley@cox.net>
I think I object to Judge Wedoff being blamed for the problems. He gave
the retired pilots more than I would have thought possible, but the
Appeals Ct. reversed him on the date of bankruptcy and the October
non-qual payment. If UA would have appealed the Jan thru Sept checks,
they could have gotten the money back. Fortunately, United didn't care
because the money would have gone to the Creditors Committee. There's
no way he could have successfully stopped the MEC from giving up the
pension plan, either. It was a "done deal", the rules of a rigged game,
bankruptcy law, IMO.
Denis
Oct 26, 2006:
More bad news. Good you didn't spend that money yet! Click to read the Appeals Court Opinions
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)
To all UAL retired pilots that have been furloughed!
Date: Sun, 10 Sep 2006 11:24:50 -0700
Former furloughed retired UAL pilots (Approx. 650 pilots):
Your initial PBGC Benefit Statement Letter and Work Sheet dated 5/16/06 was not properly calculated by the PBGC. In their original calculation the PBGC did not properly credit you with the 1/3 furlough credit that was originally agreed to in the 1991 UAL-ALPA labor agreement. Some how, this bit of information was over looked by the PBGC actuaries. This important detail was first discovered a the LAX PBGC Road Show held in April of 2006.
Your monthly retirement check will now increase by the stated amount in your September 5, 2006 revised PBGC Benefit Statement. This monthly increase in benefits is due to the addition of 1/3 of your furlough time which is added to your years of participation. As stated in this revision letter, your bump in benefits will occur on October 1, 2006.
The PBGC now owes you seven months of underpayment of benefits for the months between March - September of 2006. The PBGC has made a policy decision to not issue you a retro check for this difference. They have chosen to suspend this amount and later offset it against the PBGC's ultimate recoupement which will be determined in your final determination letter at some time in the future. Normally the PBGC final determination letters are issued to plan participants approximately three years after the PBGC assumes control of a defined benefit plan.
"John Mcdannel" <johnmcdannel@earthlink.net>
Thank you, John, ed
4/22/2006
Termination News by Doug Wilsman
Open letter to Roger Hall on 4-22-06: I see on the Internet that there will be talks in early May between PBGC and URPBPA's ERISA attorney and actuary. Evidently the agenda contains a number of issues including the arithmetic that was used to reduce about 3,600 monthly benefits starting with the March 2006 checks.
In case you haven't already heard, PBGC has "nibbled" with questionable reductions for: (1) lowering the IRS cap applicable to Final Average Earnings for anyone who retired after about 12-1-1999 down to no more than $160,000; (2) giving no participation credit for furlough time; (3) changing the sequence when applying reductions for Partial Lump Sum Amount offsets and early retirement factors----United applies the PLSA offset first and then applies the early retirement factor, PBGC reverses the sequence and creates a greater net reduction; (4) applying a factor of 0.8 for a 50% contingent annuitant where the spouse is 10 years younger while United uses 0.845 and (5) using 35 steps to explain the reduction for the Level Income feature, some of which are the result of sub-calculations which are not displayed and factors from tables which are not shown. In the end the total present value of the before and after Social Security onset benefit stream is less than the present value of a hypothetical straight life annuity for the participant's situation.
I believe there are about 1,700 retirees and maybe 1,600 active pilots whose PC3 benefits are currently being calculated too low by PBGC. It should be noted that PC3 benefits are created solely by divvying up United's money---no federal money is used. So when we talk PBGC into elevating the benefits of one PC3 sub-group, there is generally less of United's money left for the balance of the PC3 group. It is really no skin off their nose---except they will need to defend any suits over their methods.
You may have noticed in the last issue of the RUPANEWS an excerpt from a Tom Davis letter to his US Airways retirees. Tom reports that after three years his lawsuit is at the Appeals Court level where the issue is whether PBGC is considered to be a fiduciary during the interim period before they issue their "Final Determination Letters." PBGC is claiming they are not and therefore it is not ripe for retirees to be going court to force them to change their arithmetic before the Final Determination Letters are issued, maybe three years after PBGC is named plan trustee.
Also, when PBGC calculated the liabilities of about 7,500 in PC3 group, they used an assumed investment return of only 3.8% for the first 20 years. I hear that lawsuits brought by other participant groups have resulted in forcing PBGC to elevate the assumed return and thereby elevating the benefits. That's good for all PC3 retirees. The PBGC's 9-30-05 annual report shows the actual investment return on their entire $56 billion portfolio was over 8.9 % producing a net income of $29 million after paying benefits of $3.685 billion.
The only way for PBGC to cry poor mouth is by listing the present value of their future benefits at $69 billion while their assets are only $56 billion, but they don't say what investment return they are using to calculate the present value----I'll bet is well below 8.9% . Note that their audited unfunded liabilities are only $13 billion----not the $23 billion you read in the press. To get that larger number they are including the liabilities from plans they have not yet taken over and may never take over.
On another subject, I get questions about the cash or stock being distributed by United for claims in bankruptcy court by unsecured creditors who are pilot retirees. Some inquiries come from some of the 1,600 who followed URPBPA's suggestion and filed for a higher claim amount for their non-qual losses for a lifetime. On an individual basis I have been suggesting to these people that it looks like United is paying about 16% of the claims (before deductions for taxes) to those who have received cash or stock---versus the 4-8% that was estimated on the ballot. So someone who is waiting for the outcome in court of his dispute with United over the amount of his non-qual claim can, in my view, estimate his potential gross yield (before taxes) as somewhere between the product resulting by multiplying the United amount of his claim by a factor of 0.16 and doing the same with the URPBPA claim amount.
Regards,
Doug Wilsman
Check Mail Compose
4/20/2006
During the LAX PBCG Roadshow it was discovered that some of their calculations were in error concerning past furlough time. Furloughees weren't credited enough so adjustments will be made along with many other later variances. - ed AvN
4/11/2006
Dale:
I have just hung up the phone after an independent safari to find out how my own lost medical benefit check was calculated. After bouncing between Poorman-Douglas, Computershare, and United payroll, I have been told that United is still working on a description of how the amount was calculated for an individual's case and will have the information "soon" and will make an announcement when it has it available.
I did find out that while the statement I got shows the date of the sale of my stock as 3-8-06 when NASDAQ reports the price per share that day was between $37.000 and $37.540, I only got $35.0731 per share. The reason given by Computershare was that the stock was actually sold over 21 days and the average price was $35.071.
I note that in the example you show in your last message indicates that the Section 1114 claim everyone received is pegged at the difference in the present value of the potential benefits before and after the negotiated change. The amount of each person's claim was not received but was listed on the ballot together with an explanation that only about 4%-8% of the claim would be realized from the sale of the stock.
In my case, I got 16% of my claim----which I calculated by dividing the "Gross Proceeds" from the stock by the amount of the claim on my ballot.
I hope this might be of some interest to your audience.
Doug Wilsman, retired pilot, 4-05-06
A 47-months Recap
(3-11-06). After the tragedies on 9-11, the airline business took an historic nose-dive. Scheduled departures were cut back, load factors were at all time lows, massive numbers of pilots were retired or furloughed and the airlines were losing billions of dollars annually. The RUPANEWS routinely contained letters with varying opinions on what would happen if our pension plan were terminated and handed over to the PBGC. I tried to get ALPA and\or United to issue detailed instructions that would enable retirees to calculate their hypothetical post-termination benefit amounts.
Both ALPA and United refused---on the same grounds that: (1) there was insufficient data available, (2) the process would be very labor intensive, and (3) the plan was unlikely to terminate in any case, so why bother. So starting in April 2002, I sought out every authority willing to comment and put together a 6-page summary report spelling out in general terms how PBGC was likely to pay, if it ever came to that. Then the first version of the Wilsman Calculator came out in February 2003 with some fill-in-the-blanks-instructions on how to estimate an individual's PBGC post-termination benefit.
About that time, Roger Hall and Rick Dubinsky and six other slightly-lower-profile former activists created a non-profit Illinois Corporation they called URPBPA and recruited about 3,000 retirees as dues-paying members (including me). Over the years URPBPA has steadfastly declined to estimate how PBGC should properly establish the post-termination monthly qualified benefit amounts it would pay to individual URPBPA members, and as far as I know that is still their position.
They have written that if the plan terminates: "IT IS VIRTUALLY IMPOSSIBLE FOR URPBPA TO DETERMINE THE EXACT FINANCIAL IMPACT ON AN INDIVIDUAL RETIREE'S PENSION INCOME" and in the very next sentence that: " In the event the plan terminates, URPBPA intends to closely evaluate the initial payments to our members and will be pressing PBGC to insure that both the initial and final payments from PBGC reflect the amount the member should be receiving."
Today about 3,600 Pilot Plan participants are receiving reduced benefits, and I have not heard of any URPBPA efforts to tell their membership whether the reduced amount they are now receiving is "the amount the member should be receiving."
Meanwhile, the last update of the Wilsman Calculator is dated 1-12-06. This revision was to accommodate the official increase in the funding percentage from 80.0% to 80.3%. Of the 6,200 or so recipients of benefit checks as of 12-30-04, about 4,300 (69%) who entered retirement before April 12, 2000, could have precisely predicted their post-termination benefit amounts by using my Calculator.
As for the 800 or so who retired after 4-12-2000 and before 12-31-01, they are being paid PBGC benefits that are about 5% lower than predicted by the Calculator. And the balance, who retired after 12-30-01, are being paid by PBGC about 7% less than indicated by my Calculator. An unknown number inside that last group opted at retirement for a Level Income Feature and my Calculator estimated their post-termination benefits about 20% too high, so URPBPA was right all along ----it was impossible to determine the EXACT FINANCIAL IMPACT.
Setting aside the Level Income feature, if PBGC insists on perpetuating the current minor disparities between its methods and those used by United that triggered the small differences between what I estimated and what PBGC actually pays, then those participants who are impacted by these disparities may need to take action against PBGC----assuming PBGC's methods are wrong and United's were right. These "victims" would need to consult with an ERISA LAW attorney and an actuary for an opinion on whether PBGC is wrong---it might not be. I believe URPBPA has such experts on retainer.
As I have written before, it should be noted that PBGC sends out the initial estimated reduced monthly amounts for maybe three years and then does an audit; whereupon everyone's individual account is reconciled, retroactive back to the termination date. Below is a portion of a recent letter to retired US Airways pilots from their legal team that deals with this issue. The US Airways Pilots' Plan will have been terminated three years as of 3-31-06. Doug
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March 10, 2006
Dear Soaring Eagles Member:
There are two separate and distinct periods during which benefits are paid by PBGC. We are currently in the period during which PBGC pays “interim” benefits. This period ends when PBGC issues its “Final Determination.” A large part of the case now before the Court of Appeals has to do with whether or not PBGC acts as a fiduciary in its role as trustee during the interim period. If it is found to be a fiduciary during this period, as we contend, it can be sued for breach of its fiduciary duty, as we are doing. If it is found not to be a fiduciary, a suit must generally wait until PBGC issues its Final Determination at which time an ERISA-established 45 day period begins during which participants may dispute the benefit levels expressed in PBGC’s Final Determination. Should it come to that, we are prepared to file a group dispute for each classification of benefit error and litigate as necessary.
(END of Wilsman's update.)
Check Mail Compose
ANALYSIS OF UNITED AIRLINES PROPOSED
“BUY DOWN” OF THE NON-QUALFIED PENSION OF
CAPT. REAL BUT ANONYMOUS
United proposes to set the present value of the stream of income due each retired pilot under the non-qualified portion of the pension before applying the estimated 4 to 8 cents (it seems to be .10405 cents converted at $35.91 per new United stock share) valuation on the dollar to settle this part of the bankruptcy proceedings. Although there are several values (interest and mortality) necessary to determine this lump sum the prime determinate is the assumed interest rate. United and the United Retired Pilots Benefit Protective Association (URPBPA) have both set forth a proposed amount but neither has made known the factors (and arguments) in their calculations. United, tilting things in their favor, has used an unrealistically high rate (7.55%, my estimate. I’ve been informed that United is using 6.25% - but then they must be manipulating the mortality tables. PBGC is using 3.8%) similar to what got the pension into trouble in the first place; there is no security, suitable for pensions, that yields that rate available in the market today. Consequently, without transparent disclosure of variables, the dollar amount varies considerably according to the information each participant plugs into the formula. Our solution with explanation follows:
Date of Birth: March 4, 1937
Age at non-qualified termination October 1, 2005: 68.5 years
Life Expectancy: 13.6 years - 1995 Department Of Health And Human Services Table
Monthly non-qualified payment: $1,196.41
Assumed interest rate: 4.53% - New 30-year Treasury bond, issued February 9, 2006, day’s high rate. This rate is close to other Treasury issues
Protocol: Hewlett-Packard HP-12C calculator and attendant July 1987 Owner’s Handbook And Problem-Solving Guide
Results:
Lump sum for insurance annuity: $157,450.00 (company quote)
Our calculations with above givens: $145,332.00
URPBPA Proposal: $134,929.00
United Proposal: $118,671.00
A difference of $38,779 between high and low figures; not even in the “ball park” for reasonable people.
It must be remembered that the check received from United was a net or “clean” amount. If the individual is now required to administer his own fund be will incur additional expenses – thus further reducing his yield and increasing the lump sum required – similar to United. United’s expenses were 5.9% (December 31, 2004 Annual Report Pilot Pension Plan.) and an individual would probably pay twice that.
It’s obvious that without a balancing power base the employees, working and retired, are nothing more than pawns in a rather malicious game.
Pilots Lose, comin' and goin'
Doug Wilsman
(Written 2-23-06)
It was hard enough convincing folks to become intimately familiar with how PBGC's PC3 and PC4 calculations will impact their new monthly pension benefit for life. Now that PBGC has ended the suspense by sending a letter to those who will lose starting March 1st, four other issues still remain that are driven primarily by assumed investment yields and mortality tables. They are:
(1) PBGC's unilaterally deciding the amount of PC3 benefits that the remaining assets in our plan will purchase;
(2) Judge Wedoff's deciding how much new UAL stock each of us will get because UAL has reduced, for life, the medical and life insurance it was providing to retirees;
(3) Judge Wedoff's deciding how much new UAL stock is due to compensate for the loss by some retirees of a lifetime of non-qualified benefits; and
(4) District Judge Lefkow most likely deciding whether URPBPA will have proven in her court that their Split/Freeze Plan will actually work.
In number (1) and (4), the task is to see how big a benefit can be produced by the former UAL assets left in the pilots' plan and in (2) and (3) the task is deciding the present worth of a lifetime-benefit-stream that is being lost. In all these calculations it is necessary to estimate when people will die and how much investment interest can be earned and it is mechanically possible and would be eminently fair to use the same mortality tables and interest earnings in each of these calculations. But guess what? It should surprise no one that each case uses a different set of assumptions and in three out of four, the assumptions used are disadvantageous for the pilots.
The classic comparison is between United's assumptions of the present worth of the loss for a lifetime of non-qualified benefits by about 1,600 URPBPA members and how PBGC calculates the PC3 benefits of these very same retirees. Both PBGC and United use the same mortality tables, but PBGC uses an interest rate of 3.8% and United uses an interest rate of 6.25%. That produces an outcome where pilots get less bang for their buck with PBGC and get less UAL stock for their lifetime of lost non-qualified benefits----a double whammy.
And interestingly enough, URPBPA is complaining about the out-of -whack assumptions by United in apportioning new stock to the non-qualified losers but it has acquiesced to United's using of these very same assumptions when new stock is being apportioned to those who lost all their post retirement life insurance and some of their medical coverage.
Here is a quick and dirty hypothetical. For an average guy who is age 60 on the termination date, using a 3.8% interest rate will buy him a monthly payment of $2,952 for life if there is $500,000 of plan assets available for him. Assuming a 6.25% interest rate his benefit for life would be $3,621----an increase of 23% monthly or $162,000 over his lifetime.
And if the same average guy lost a lifetime non-qualified monthly payment of $4,000, the present value of that benefit stream would be $552,393 using 6.25% interest and $677,578 using 3.8% interest---enough to buy him 23% more United stock. He is losing in both situations!
Similar disparities can be created by arbitrarily changing each participant's assumed death age. In determining the amount of monthly benefits a certain amount of assets will purchase, it is an advantage to a pilot if he is assumed to die sooner, and the opposite is true in the case where the present value of a given benefit stream is being calculated. URPBPA is claiming to Judge Wedoff that it is "reasonable" to assume a retiree will live longer than United is assuming and therefore he should receive more stock.
But this same argument about how long pilots live may come back to bite URPBPA when its attorneys argue that their Split/Freeze plan will work. They are claiming that the assets of the plan are sufficient so the interest earnings plus the payout of a small proportion of the invested principal will be sufficient to provide all the annual pre-termination qualified benefits for all current retirees until they die, with no contributions by United to the qualified plan. If they concede that pilots will live longer, this thesis will be harder to prove.
If the validity of the Split/Freeze ever actually makes it before a judge, I will write a detailed piece about what we can learn about it from papers introduced into evidence at the September 2005 trial in Judge Wedoff's court by URPBPA's actuary. Doug
Check Mail Compose
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" The PBGC's math"?
(Written 2-16-06)
From Doug Wilsman
PBGC's reduced benefit amounts
About 3,600 participants who receive monthly benefit checks from the United Pilots' A-Plan got a letter two weeks ago stating the monthly benefit amount(s) PBGC will pay commencing on March 1 versus the amount that United previously paid. I have been sent a copy of this PBGC paperwork by about 75 recipients to see if I can decipher how PBGC arrived at the amount of the reduction.
About 2,600 participants got no letter because their benefit will not be reduced by PBGC and there are a few cases that PBGC has set aside because the reduced amount is tricky to figure out. These tricky-case-people will get a letter maybe by March 1st containing the estimated reduced amount effective on April 1st.
As I sit here writing this, we don't know whether the March checks will be reduced for those who were notified, and we don't know if the plan will ever terminate and if so when the effective date will be. It is a matter of interest to me and maybe to those who are slated to get reduced checks to find out the mathematical process PBGC used to arrive at their reduced amount. On US Airways, the retirees hired attorneys to take PBGC to court because PBGC did not appear to follow the law when it calculated the estimated reduced benefits. While that is a noble enterprise (and I sent them $500 to help defray their expenses---about the same amount I have sent off to URPBPA so far). It should be understood, however, that such legal action may be premature on UAL even after all this legal dust has settled and we know that the plan will be terminated and the effective date.
Considering that some of the legal disputes may not be resolved short of the US Supreme Court, it might be useful to speak to how PBGC defends itself against challenges to the arithmetic it uses to reduce benefits. It should be noticed that PBGC labels these announced reductions as estimates. When they are challenged in court PBGC's first line of legal defense starts out that they are not finished yet.
PBGC refers the judge to their time-honored policy to stick with these estimates for maybe three years after which they will issue a detailed audit to each participant and give him 45 days to avail himself of PBGC's time-honored appeals procedure. If PBGC did wrong they will make good on the damages, with interest.
So when we pay an attorney to go to court to get PBGC to correct mistakes sooner than the 3-year wait for the audit, the first thing PBGC will tell the judge is: "What's the hurry----PBGC will no doubt just naturally correct any errors during the final audit process and PBGC really can't be sure before then exactly what the correct reduction should be."
And anyway, all these participants who are concerned about a small percent that PBGC might be underpaying them temporarily, have been substantially overpaid by the plan every month since the check dated January 1, 2005----that's 14 checks so far.
Right now the only attorneys who represent retired United pilots and widows are very busy with matters that need attention immediately. It will be up to the members of URPBPA to decide whether they want money and energy devoted to beating on PBGC in court over the arithmetic PBGC has used to calculate the estimated reductions---if these reductions ever become effective. DOUG
(Written 2-2-06)
PBGC's reduced benefit amounts.
The letters PBGC mailed on 1-27-06 from Alexandria to about 3,600 pilot plan participants are not all delivered yet. These retirees were selected because their benefits will be reduced. There are about 2,600 other retirees who got no letter because their benefits will not be reduced. The early warning volunteers on my list (34 of them) have sent me a copy of their letter and I have compared what PBGC will actually pay to what I estimated PBGC would pay. (See spreadsheet below.)
Those on my list who retired between 1993 and 1999, who will get 80.3% of their current benefit, came out exactly as I had predicted. Those who were subjected to only the 5-year look-back will be getting a little less than I predicted, because of a slight difference in how PBGC calculates qualified final average earnings vs. how United calculated and reported them. And for the same reason, those who were subject to both the five-year look-back and the three-year look-back will get about 5% less than I predicted. This group may also be impacted by an uneven application of the credit for furlough time allowed by PBGC.
That leaves the folks who opted for a Level Income Feature at retirement. I did really poorly in my estimates---they are way too high. I am still at sea over how PBGC arrived at its numbers. There are the 11 entries on the sheet below that apply to level pay folks. They can be located because they each have two numbers in the highlighted column. The basic theory of a level income feature is that after your Social Security payments begin, you’re A-Plan benefits are reduced by the same amount that United estimated you would get from SS.
The PBGC's three-year look-back is defined in the law as the payment by PBGC of the benefit the plan would have paid three years before the Date of Plan Termination (DOPT), using the plan's benefit formula that is at least 5-years old on the DOPT. I estimated how United would have calculated these payments as of three years before the DOPT. United would have reduced the plan's payments after the SS onset date by the amount of the estimated SS benefit.
PBGC doesn’t come close to doing that in their calculations. Where the SS payment is, say, $1,850 PBGC only reduces their benefit by, say, $800 on the SS onset date. So what PBGC ends up with is not a level pay situation at all.
As I sit here writing this, I have no really good clues how PBGC can justify this kind of an outcome. I have been seeking information for over a month now from PBGC's Sarasota office and the latest is that it will take from 1-4 weeks before they will show me precisely what they did to arrive at the benefits for a single level pay participant.
So now what? It was my original intention to fold up my tent and disappear into the sunset as soon is I wrote this report. But you should know that when I was on the MEC for the first time in 1970, the Captain Rep. from SFO, who shall remain unnamed, branded me: "Crusader Rabbit." I always thought that he missed the mark slightly. "Crusader Bulldog" would have been more on target.
The bulldog in me is still there at age 80.6 so I will probably see this level income mystery to a resolution. As soon as I can report that PBGC has explained its level income calculations in terms everyone can understand, then this job will be completed. Doug
US Airways' Pilots' interface with PBGC after almost three years
From: DHWilsman@aol.com [mailto:DHWilsman@aol.com]
Sent: Sunday, January 22, 2006 12:19 AM
To: TeeGastonDavis@aol.com
Cc: DHWilsman@aol.com
Subject: synopsis needed
To: Tom.Davis
Tom:
Yesterday our bankruptcy judge signed an order blessing United's Plan of reorganization. Roger Hall's attorneys wrote today on the web that "As a result of this order, United will no longer be operating as a bankrupt company."
It occurs to me that my audience of about 3,200 pilot retirees and widows would really benefit from reading an account of what has transpired on US Airways with your interface with PBGC after your defined benefit plan was terminated on 3-31-03----almost three years now. I am wondering if such a history has already been written which you could share with us or if not, whether you would do us a big favor and write one we could publish.
I would have it published in an edition of our monthly newsletter and put on our Web site.
What do you say?
Doug Wilsman, 1-21-06
(Doug's note: Tom is the leader of the US Airways Retired Pilots' dealing with lawyers, fund raising and communications.)
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Dear Doug,
(Sunday, January 22, 2006) We are very grateful for the UAL pension reports that we had somehow obtained by the time we first learned that our pension would be terminated. Your insightful analyses gave us an invaluable head start and continue to be a rich resource. In fact, I quoted you in my very first email update to our group. So, of course, I am happy to honor your request for a synopsis of our first three years before the PBGC. Maybe it will repay you in small part for all you have done for us. I believe we’ve copied you on all of our email updates so you already know most everything our members know.
Basically, we’ve approached the PBGC issues as matters of law, not of public opinion. The relief we seek can only be found in a court of law. More on this later. Initially, US Airways and its actuary, Towers and Perrin, estimated PC-3 to be 85% funded. PBGC, as is its customary practice, used US Airways’ PC-3 estimates to reduce every retiree’s benefit to 85% of its original value, in total disregard of its own Maximum Guarantee, which increases actuarially with age. In general, the up-sloping guarantee line begins to cross above the actual benefit line at about age 69 so that a 69 or 70 year old or older should have received his full pre-termination benefit. In addition, US Airways and PBGC had a dust up over the amount of compensation PBGC should receive for its takeover of the under funded pension. This resulted in PBGC’s own actuary testifying, not once but twice, that PC-3 was 98.5% funded. We had already filed suit in US District Court and when we raised these issues PBGC reluctantly corrected the benefits being paid. The basic pre-termination benefit was increased to no less than 98% of the original benefit and those who were about 69 or older were restored to 100% of the original benefit.
However, as they say, the devil is in the details. So, while the gross issues described above were a huge step forward, the overall matter remains in a state of flux. Various rules severely impact the benefit of a majority of our members. These include the 5-year look back rule that disallows pension enhancements enacted within the five years immediately preceding plan termination. We have 326 retirees who received an enhanced early retirement benefit pursuant to a letter of agreement with an effective date more than five years pre-termination. PBGC is disallowing this enhancement based on a specious interpretation that substitutes an open enrollment period that ends within the five year period for the effective date on the face of the agreement. We are also severely impacted by the three-year rollback rule that calculates PBGC benefits at the levels they would have been had the retiree retired three years or more prior to plan termination. In the case of partial lump sum settlements, PBGC is inappropriately deducting the annuity value of the lump sum, which has already been paid, from the maximum guarantee that is applicable only to annuities that are in pay status. There are other significant issues that I prefer not to articulate at this point since we need to preserve flexibility in our litigation strategy.
Aside from the more or less global issues, such as the above, there are a multitude of parochial issues affecting subgroups of our membership. Former Piedmont pilots have a normal retirement COLA that is unique to them which PBGC is not fully honoring even though it has been in effect at least 20 years. There are issues unique to former PSA pilots and to pre-1973 Allegheny pilots to be resolved. There are also issues of significance to those who were disabled when they retired—both totally and permanently and otherwise.
So the big picture is that there are a myriad of issues that create a tender box of competing interests with a huge potential for trouble. One of our handicaps is that we don’t have a finely tuned political structure with local councils, master councils and numerous committees. Our greatest strength is that we don’t have local councils, master councils and committees (and crew rooms). PBGC has attempted to ignite this tender box by overtly reminding those attending regional meetings that our success in the early retirement issue would come at the expense of everyone else. It is manifestly in our interest not to allow them to succeed.
My overall impression of the first three years of our mission is that ERISA which governs many of our issues is a very complex and specialized corner of the law. It requires attorneys who specialize entirely or almost entirely in this field. Consequently they are expensive. Therefore, our first challenge is to raise the necessary financial resources. Given the fact that our source for these funds is a group of folks whose lone common characteristic is the financial challenge they are experiencing due to the termination of their pension plan, their financial support has been truly remarkable.
The second challenge is to somehow maintain the cohesion and unity of our group when so much of what we do is governed by arcane law with which we are unfamiliar and which is so often counterintuitive. A central dispute now before the Court of Appeals, for example, is whether or not PBGC is a fiduciary when it acts as trustee of the Pilots Pension Plan. If PBGC is found to be a fiduciary, its failure to pay benefits in accordance with the statutes and the terms of our collectively bargained pension would constitute a breach of its duty and, therefore, be litigable. Whereas, if it is not found to be a fiduciary, the exhaustion clause of the Railway Labor Act may require that we arbitrate the disputes at the Retirement Board before litigating the issue in court. ALPA, which appoints two of the members of the Board has consistently maintained that it doesn’t represent retirees. Moreover, recovery of benefits by the retirees may come at the expense of the two non-retirees on the Board, their constituents and their sponsor, the MEC, whose agreements we are challenging, in many cases. It is a conspicuous conflict of interests but that argument has not been successful in skipping arbitration in the past, with courts ruling that if such a conflict results in a bad arbitration award you can then go to court, having exhausted your administrative remedies.
In summary, money is the mother’s milk of pension litigation. Without it, and lots of it, the cause is hopeless. PBGC openly boasts that it has more money than we and that it can outlast us. Unity and cohesion are necessary conditions for raising sufficient funds to dissuade PBGC from that belief. We constantly remind ourselves that we are diminished when we castigate PBGC, US Airways, ALPA, the political environment or other things about which passions run high but over which we have no control. In the end, this will be resolved in a court of law, not in the court of public opinion. My aunt, a surrogate mother in many ways, told me years ago that “who the gods would destroy, first they make angry.” How much worse would it be to make ourselves angry?
Best regards,
Tom Davis
> The PBGC advised that they plan to send a letter to each United retired pilot by February 1, 2006, advising them of the adjustments that will be made to the retiree’s pension payment. The PBGC expects the new pension payment amount will be effective with the March 1, 2006 payment. The PBGC stressed that any cutbacks in benefits made at this time are done on an estimated basis and do not represent a final benefit determination by the agency.
>
> The PBGC is in the process of gathering the information it needs to process the termination of the plan and determine final benefits. This process takes time; the PBGC typically issues final benefit determinations 2-3 years after PBGC assumes trusteeship of the plan. For the UAL Pilots Plan, this would mean some time in 2008. If it turns out that PBGC's original estimate was too low, PBGC will pay any net underpayment, with interest, at the time it issues the final benefit determination. If the estimate was too high, net overpayments are recouped by reductions to future benefits (computed without interest). Generally the reduction is limited to 10% of the monthly benefit amount. If a participant disagrees with the final benefit determination, he may appeal it to PBGC's Appeals Board.
>
> The PBGC anticipates holding meetings with United pilots at various locations in the US in April 2006. The purpose of the meetings will be to explain the new payments and the PBGC's process, as well as to respond to questions from retired pilots. PBGC said it would have staff with computers at the meetings, and could answer specific questions about an individual's benefit at that time.
PILOTS PLAN.
December 24, 2005
A Humpty-Dumpty Christmas
(Written 12-24-05) So what will it take to put Humpty-Dumpty back together again?
There are about 6,200 participants drawing benefits from the UAL Pilots' Defined Benefit
Pension Plan who will get their first qualified check from PBGC in about a week---still in the
usual dollar amounts. Reduced amounts, if any, may start coming for about 3,600 participants in
February or March. About half of the 6,200 were also receiving a non-qualified check each
month. That stopped as of last October 1st.
Retired Capt. Jim Hosking of California has spearheaded a grass-roots campaign that has
convinced the Democrats in the House of Representatives to support legislation which, if passed
and signed by President Bush, would require UAL to retain sponsorship of our Plan unless it
proves United cannot survive without the termination. The proposed legislation will likely come
to a vote early next year.
Meanwhile, retired Captain Roger Hall of Florida heads up a non-profit group called
URPBPA that has collected money to bring legal action against (among other things) the OK by
bankruptcy Judge Wedoff of PBGC's seizure of our Plan retroactive to 12-30-04. URPBPA's
attorney at the trial last September indicated that Judge Wedoff erred when he failed to require
PBGC to provide testimony proving that UAL needed to terminate our Plan to survive. A copy
of URPBPA's 42-page appeal dated 12-22-05 is posted at: www.ualpilotpension.com It's great
reading!
If Judge Wedoff's decision is reversed by United States District Judge John Darrah, we
can expect United to ask Judge Wedoff for a distress termination where the issue will be whether
UAL can prove to Judge Wedoff it is unable to exit Chapter 11 successfully with our Plan intact.
So either way----if the good guys prevail in either the Federal Legislature or the Federal Court---
Humpty-Dumpty will be put back together again if United is unable to prove its contention that it
needs a termination of our Plan to survive.
Merry Christmas everyone . DOUG