Fellow pilots,
APA has repeatedly expressed strong opposition to termination of our defined-benefit pension plan, as have other interested parties, including the Unsecured Creditors’ Committee and most especially the Pension Benefit Guaranty Corporation (PBGC). The APA Board of Directors recently made the decision to support continuation of the A Plan in the form of a “hard freeze.” Your leadership has taken this and other concerns directly to senior management.
I am pleased to report that APA and management have achieved meaningful progress on the issue of our defined-benefit pension plan, which is good news for all of our pilots. In what I would describe as the first breakthrough we have achieved since bargaining resumed on Feb. 7, management has indicated they would work with APA to identify alternatives to terminating our A Plan. Management also informed the APA Negotiating Committee yesterday that they have decided to pursue a “hard freeze” of the other employee groups’ defined-benefit plans, rather than the plan terminations they had originally sought in their 1113(c) proposal.
There are some hurdles to overcome with respect to obtaining a hard freeze of our defined-benefit plan. Our plan is the only one on the AMR property that includes the option of a lump sum and our experts have concluded that attempting to preserve a lump-sum option is not achievable, in that it would lead to a termination of the A Plan. Therefore, before changes to our pension plans can be accomplished, we will need to ballot those pilots covered by Supplement B of the APA-American Airlines Collective Bargaining Agreement. An affirmative vote would pave the way to preventing an A Plan termination by agreeing to a freeze and elimination of the lump-sum option. If the pilots covered by Supplement B do not agree to a freeze, the A Plan will likely be terminated, which would also result in the elimination of the lump sum. By voting to support a freeze, thousands of pilots will preserve their earned annuity benefits by avoiding plan termination and the much lower annuities based on PBGC limitations.
Additionally, we plan to work with management to obtain funding relief from the Treasury Department and the Internal Revenue Service to help secure the frozen A Plan benefit.
In a hard freeze, each plan participant’s earned annuity benefit is permanently fixed at its dollar value at the date of the freeze. If the participant retires at or after age 60, they would receive the amount as a life annuity, adjusted for the form of annuity selected. If the participant elects to retire before their sixtieth birthday, the A Plan’s early retirement factors would apply as they do today.
