Delta NOT to make pension payment to pilots...

[NuGuy]

So do you retire early or not right now? These plans are being terminated and the results are especially bad for pilot retirees at age 60. Do you know if the PBGC will ever seize a already paid out lump sum? Can a recipient properly tuck away the monies and keep them from the PBGC?

Thanks for the academic recap on the funding of A plans.

Heyas Flop,

First, I do not believe the PBGC has recourse for lump sums, or so I'm told. Remember that lump sums are often a fraction of what the annuity would be (think about it like the 'cash option' on the lottery). Otherwise there would be a salmon run going on to Costa Rica right now.

Second, what you get from the PBGC is radically different for each pilot, depending on what "bucket" you're in. Most plans, by current rules, have more than enough to make all those who have been retired more than 3 years "whole", meaning they will see no reduction. These pilots, plus the pilots who, by their individual plan rules, COULD have retired in the last 3 years are known as PC-3. This is why you get the 3 year lookback for PC-3 benefits, because it assumes that you will retire when you first had the chance. These pilots get paid off first.

Everyone else in the plan is known as PC-4. Whats left in the plan is then divvied up amongst these pilots. It could be zero. BUT, the PBGC provides a minimum, so you will never fall below that. A junior pilot, for example, might have a monthly benefit of $800/mo accrued. Since the PBGC minimum is above that, when he turns 60, he'll get a check for $800/mo, so he really didn't lose anything. It's the mid-senior pilots, the ones who couldn't yet retire, but had benefits accrued way above the minimum, that really get hammered.

Now, 'A' fund plans have a maximum benefit accrual by law, and I don't have the number infront of me, but with typical major airline plans (at least as they WERE), you could easily exceed the maximum accrual over the span of a normal career. This led to what is known as "excess" plans. These plans were started, over and above the main 'A' fund, to allow these pilots to continue to accrue retirement benefits, which are handled outside of the PBGC process. This is the plan that DAL is threatening right now, and it's also why only the top earners at DAL are getting the letter. This has NOTHING to do with the main 'A' fund. I'm not sure what happens to to disposition of these funds in BK, but since they're not covered by the PBGC process, I'm sure it can't be good.

A lot of terms are being thrown around:

Plan Termination: This can only happen if there are enough funds in the plan to make everyone whole. It can happen by mutual agreement, and usually the funds go into a annuity of some kind. This really isn't a bad thing.

Distress Termination: This is what happens when there is NOT enough funds int he plan, and the plan sponsor (IE the company), needs to snake out from the obligations. The PBGC can also force a distress termination. This IS a bad thing.

Nu

 

[Flopgut]

NuGuy

Awesome knowledge! Some of it I have heard before, much of it I have not.

I'll formulate a better question after I read that some more.

Thanks again.

 

[bafanguy]

Heyas Flop,

First, I do not believe the PBGC has recourse for lump sums, or so I'm told. Remember that lump sums are often a fraction of what the annuity would be (think about it like the 'cash option' on the lottery). Otherwise there would be a salmon run going on to Costa Rica right now.


Distress Termination: This is what happens when there is NOT enough funds int he plan, and the plan sponsor (IE the company), needs to snake out from the obligations. The PBGC can also force a distress termination. This IS a bad thing.

Nu

Nuguy,

You're obviously more knowledgeable than the average guy, but as for the PBGC having the ability to reclaim lumps, I can only quote Elizabeth B. Koby, Managing Attorney, ALPA R & I Dept. from a letter sent to DL pilots, dated Feb/03:

"In general, the PBGC has the authority to recover lump sum benefit payments made to a participant during the three years prior to a 'distress termination'. However, the PBGC has indicated to ALPA that it would not LIKELY seek to recapture lump sum payments made prior to the 'distress termination' of a pilot plan, since the lump sum payments are not being made in anticipation of the plan terminating but rather in the ordinary course of plan administration."

I can't find a chapter & verse statement from the PBGC website. It may be in there, but I gave up trying to find it. I would like to see the original source, but we have known here for years the authority exists. To our knowledge, it has never been exercised...so far. The last USAir lump, according to my source, was paid in DEC/03 and no attempt has been made to reclaim it, and my lump was paid in OCT/03, both before the PBGC faced going in the toilet under the weight of two or three more BK's.

Sounds OK, huh ? Well, perhaps, but a lot has happened in this arena since Feb/03, and I have no later "opinions" worth listening to ( including my own. In fact, I don't have an opinion...only questions ). I'm trying to get some, but info is hard to come by right now. I'm not saying the sky is falling but only that this is a question worth asking considering what's at stake for each pilot. You trust the federal government ? I sure don't.

As for the lumps being a fraction of what the annuity would be, in our case that fraction is 50% ( other airlines have different arrangements ). You have to remember the environment in which over 2000 of us at DL took the lump vs a straight annuity: a crisis of trust...damage control. There is no one left to trust any any point in this situation. Anyone who retired without taking the lump will, in fact, most likely end up with nothing in the near future.

A salmon run on Costa Rica ? My sources recommend Panama. Getting that much money out of an IRA and out of the country without attracting unwelcome attention from our buds, the Feds, may be tricky. Nothing but unanswered legal questions here...I don't have a clue. Would attempts to move, shift assets under current events be viewed as an attempt to avoid payment if they want the lump back ? Don't have a clue. Just thinking out loud.

Nope, the sky isn't falling and probably won't, but it's reasonable to ask why it's beginning to sway just a bit. I'm no expert, just one of those people for whom all this isn't just an amusing academic debate.

 

[NuGuy]

Heyas Bafanguy,

You may very well be correct, but our sources cannot find the authority for the PBGC, either, but they echo ALPAs interpretation.

I suppose that if the PBGC comes sniffing around, you can either be "out of town" or stand there with a stupid look on your face and sing a tune from Robert Palmer. ("She's so fine, there's no telling where the money went").

I can only imagine that if they did try to reclaim the lump sums, that it would get ugly, real fast.

Best,
Nu

 

[klhoard]

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I think I'd take it all in $1's and head for Platinum Plus. Tell them they can get their lump sum back from the girls. . .
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[bafanguy]

Heyas Bafanguy,

You may very well be correct, but our sources cannot find the authority for the PBGC, either, but they echo ALPAs interpretation.

I suppose that if the PBGC comes sniffing around, you can either be "out of town" or stand there with a stupid look on your face and sing a tune from Robert Palmer. ("She's so fine, there's no telling where the money went").

I can only imagine that if they did try to reclaim the lump sums, that it would get ugly, real fast.

Best,
Nu

...I see...your sources echoed ALPA's interpretation. What's the source of their "echo" ? As you can see, there are only questions without answers.

As for avoiding standing there "...with a stupid look on your face...", give me the phone number of the lawyer who has the knowledge and experience to GUARANTEE a smooth, legal transfer of the funds out of the USA ( under IRS scrutiny ) in the current pension-meltdown environment. Not some laywer who makes his living with drug runners laundering money. Tell me EXACTLY how you would do this. It's pretty easy to sit on an anonymous forum and pontificate when you don't have to live with this situation. Give me phone numbers of up- front lawyers who have a proven track record of helping law-abiding people do this.

Don't have any ? Thats' pretty much what I thought.

klhoard,

That added a lot to the discussion.

 

[klhoard]

.... . .<snip>. . .

klhoard,

That added a lot to the discussion.

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That's what I'm here for, buddy!!
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[NuGuy]

Heyas Banfanguy,

Hey man, I can see you're grouchy, and you have every reason to be. I can only tell you what I know.

Our MEC retirement folks said "No, they cannot reclaim a lump sum". When I pressed to test, they gave me the same non-answer from ALPA you got.

Pick up the yellow pages where you live. Find an estate/retirement lawyer. Pay the man some money. Get someone that is working for YOU, not the company, and not ALPA. The money you save might be your own.

Nu

 

[bluejuice787]

Nuguy-

It is my opionion that you, while sounding "matter of fact", are incorrect about the underfunding of pensions. This was happening well before 9/11. Businesses of all sorts were dumping monies into VC not least of which were USairways and DAL.

United was underfunding yet spending more than 1bil just to try and purchase U om 1999. Avolar comes to mind also.

 

[skykid]

bluejuice, where are you getting those numbers from? How about some sources.