Looking for details on the underfunding of airline pensions just porked on the IWSB

[canadflyau]

Looking for details on the underfunding of airline pensions just porked on the Iraq War Spending Bill.

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`Pork' persists in Congress' Iraq war spending package
By Andrew Taylor Associated Press


"WASHINGTON - In Washington, it pays to read the fine print. The Iraq funding bill is a perfect example, studded with provisions to help dairy farmers, airlines, salmon fisherman and rural counties hurt by cutbacks in federal logging.
And that's just scratching the surface."
"Then there are airlines like Continental and American, who won a last-minute battle with the White House over a plan that would allow them to together reduce the contributions to their pension plans by almost $2 billion over the next decade. "


"The White House took a firmer - but losing - stand against provisions aimed at helping American and Continental, looking for flexibility in their pension plan contributions.
But American and Continental were backed by Senate powerhouses such as Majority Leader Harry Reid, D-Nev., and No. 2 Democrat Dick Durbin of Illinois. The two airlines were seeking relief comparable to that awarded Northwest and Delta last year.
The White House protested, administration officials said, claiming the provision favoring American ran counter to an agreement to keep wholly new material out of the bill. The provision matched relief provided to Continental in an earlier, vetoed version of the bill.
The two companies, along with a few smaller airlines such as Alaska Air, will be given leeway to reduce contributions to their defined benefit pension plans by a combined $2 billion. White House Chief of Staff Joshua Bolten issued a veto threat, White House and congressional officials said, but backed off after Reid insisted the provision go forward."

 

[klr1395]

I hope all that believe the Republicans are so much worse towards labor see this. Sounds like it isn't the case anymore, they are all equally bad.

 

[canadflyau]

What I am looking for is some details. I heard (rumor,) that it changes some factor used, and will drop lump sum payouts by 10-15%

 

[lostplnetairman]

The war funding bill allow the airlines to assume an 8.25 percent rate of return on their investments over the next 10 years, instead of 6 percent required by last year's pension law. That means they don't have to contribute as much to the plans because they can assume that their contribution will have the higher rate of return. This will save the airlines that benefit from this (American, Continental, Alaska and a few others) about $2 billion over the 10 year period.

HRDiva

 

[canadflyau]

Help me understand.

This pork will put AA, CAL, AAL and a few others on par with terms (rate of return) that DAL & NWA got in BK?

I thought in BK that their pensions plans were slashed (UAL, NWA, DAL?)

I also thought that by increasing the rate of return also triggered a change in the payout formula for the lump sum (approx 10-15% less)?

Thanks for the help!

 

[lostplnetairman]

American and Continental lobbied for the change after DAL and NWA received permission to use a higher rate, 8.85 percent by law in 2006. They felt that this would create a more even playing field given that 8.25 percent is far better than the 6 percent under the 2006 law.

AMR expects to contribute about $364 million to fund its defined benefit pension plans in 2007, and had already put in $180 million by mid-April.
American's defined-benefit pension obligation at the end of 2006 was $10.2 billion, according to its filing with the SEC. With its pension fund assets valued at $8.6 billion, AMR's unfunded liability under current requirements is $1.6 billion.

Continental's pension obligation was $2.7 billion, according to its annual report.

Each 1-point increase in the discount rate reduces the airlines' calculated pension liability by 10 percent to 15 percent, making a major difference in their funding requirements. So, instead of being underfunded by $1.6 billion, AMR will have a much reduced figure to make up within the next 9 nears.

HRDiva