And the eventual value of the Lifetime Annuity "option" with any airline in this day is probably near zero.
CAL declares bankruptcy, hands it over to the PBGC, then the government pays a dime to the dollar, or will zero it out because of the deficit.
CAL declares bankruptcy, hands it over to the PBGC, then the government pays a dime to the dollar, or will zero it out because of the deficit.
"Even with CAL’s assurances, you should be aware of the consequences of a liquidity shortfall. If a liquidity shortfall occurs, and CAL fails to make a contribution to cure it, they would be in violation of applicable pension legislation and would be subject to a ten percent excise tax on the amount of the liquidity shortfall. For example, if at the end of the fourth quarter, there is a liquidity shortfall of $15M, CAL could contribute $15M to the pilot pension fund to make up the shortfall or instead, they could pay $1.5M to the IRS as a penalty. To pay the excise tax rather than make a contribution seems a waste, since the excise tax does not go towards paying benefits or offsetting the shortfall, but rather solely to the IRS’ coffers. It is important to note, however, that if CAL chooses to pay the excise tax in lieu of making the necessary contributions, the lump sum option would not be available for each affected quarter.
CAL has this year contributed $70M into the non-pilot pension fund (the one management is in) and only $32M into the pilot pension fund. The non-pilot pension plan is being funded above the 80 percent level -- the minimum level necessary to protect their lump sum-- while our pension plan has deteriorated and come closer to a liquidity shortfall and the possible resulting suspension of our lump sums."