General Lee
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Press ReleaseSource: Northwest Airlines
Northwest Airlines Supports Pension Reform Legislation Introduced in U.S. Senate
Wednesday April 20, 6:03 pm ET - Bill Would Help Protect Taxpayers and Workers With Pension Benefits
MINNEAPOLIS, April 20 /PRNewswire-FirstCall/ -- Northwest Airlines (Nasdaq: NWAC - News) today announced its support for legislation introduced by U.S. Sen. Johnny Isakson (R-Ga.) and co-sponsored by U.S. Sen. Jay Rockefeller (D- W.Va.) to reform how companies pay the unfunded liabilities of their frozen defined benefit pension plans. The "Employee Pension Preservation Act of 2005," which was introduced in the U.S. Senate today, will allow companies to fully fund their frozen defined benefit pension plans over a 25-year period versus the three-year "catch-up" requirement in place today.
"Northwest is in strong support of the bill introduced by Sen. Isakson and co-sponsored by Sen. Rockefeller and we thank them for their leadership on this issue," said Andrea Fischer Newman, senior vice president of government affairs. "This legislation will help protect airline employees from losing any of their hard-earned pension benefits and help protect taxpayers from even more pension plans becoming the responsibility of the Pension Benefit Guaranty Corporation (PBGC)."
Northwest's low-cost carrier competitors, such as Southwest, JetBlue and AirTran, provide their employees with less expensive defined contribution plans such as 401(k)s. Northwest, a company that was providing air service and pension benefits long before 401(k)-style plans ever existed, is one of just five remaining U.S. airlines that provide its employees with defined benefit plans.
Northwest's pension plans were fully funded as recently as 2000. However, as a result of four consecutive years of falling interest rates, major stock market declines during 2000 through 2002, and increasing employee pension benefits, the company's pension plans are now underfunded. In addition, the law governing pension funding requires highly accelerated "catch-up" payments when a plan is underfunded. These catch-up payments are particularly onerous in the current environment as nearly all U.S. airlines struggle to return to profitability and cannot afford to make such contributions.
Some of Northwest's largest competitors have terminated their defined benefit contribution plans through the Chapter 11 bankruptcy process, turning responsibility for the plans over to the PBGC, a self-financed governmental corporation that partially insures failed pension plans. The PBGC recently reported a record deficit of $23 billion, which includes the cost of taking over pension plans at United Airlines and US Airways. The PBGC predicts a $40 billion deficit if other airline pension plans are terminated.
Northwest, the Air Line Pilots Association (ALPA) and several other airlines are working together to develop a solution to this challenge. The legislation will allow Northwest to achieve the second part of its three-part, long-term solution to the pension challenge it faces:
-- Receiving union concurrence to freeze defined benefit plans at current levels rather than terminating the plans. -- Making up the funding shortfall of the frozen plans over a longer period than current law allows. -- Establishing a defined contribution 401(k) retirement plan, to provide secure employee pension benefits going forward."The legislation introduced today will allow companies such as Northwest to fully honor the pension commitments made to employees and spare taxpayers, through the PBGC, from having to step in as guarantor of terminated pension plans." Newman continued. "This responsible solution, embraced by management and labor, is a far superior alternative to the job losses, substantial reductions in pension benefits and increase in airline bankruptcies that will inevitably occur if action is not taken soon."
Bye Bye--General Lee
Northwest Airlines Supports Pension Reform Legislation Introduced in U.S. Senate
Wednesday April 20, 6:03 pm ET - Bill Would Help Protect Taxpayers and Workers With Pension Benefits
MINNEAPOLIS, April 20 /PRNewswire-FirstCall/ -- Northwest Airlines (Nasdaq: NWAC - News) today announced its support for legislation introduced by U.S. Sen. Johnny Isakson (R-Ga.) and co-sponsored by U.S. Sen. Jay Rockefeller (D- W.Va.) to reform how companies pay the unfunded liabilities of their frozen defined benefit pension plans. The "Employee Pension Preservation Act of 2005," which was introduced in the U.S. Senate today, will allow companies to fully fund their frozen defined benefit pension plans over a 25-year period versus the three-year "catch-up" requirement in place today.
"Northwest is in strong support of the bill introduced by Sen. Isakson and co-sponsored by Sen. Rockefeller and we thank them for their leadership on this issue," said Andrea Fischer Newman, senior vice president of government affairs. "This legislation will help protect airline employees from losing any of their hard-earned pension benefits and help protect taxpayers from even more pension plans becoming the responsibility of the Pension Benefit Guaranty Corporation (PBGC)."
Northwest's low-cost carrier competitors, such as Southwest, JetBlue and AirTran, provide their employees with less expensive defined contribution plans such as 401(k)s. Northwest, a company that was providing air service and pension benefits long before 401(k)-style plans ever existed, is one of just five remaining U.S. airlines that provide its employees with defined benefit plans.
Northwest's pension plans were fully funded as recently as 2000. However, as a result of four consecutive years of falling interest rates, major stock market declines during 2000 through 2002, and increasing employee pension benefits, the company's pension plans are now underfunded. In addition, the law governing pension funding requires highly accelerated "catch-up" payments when a plan is underfunded. These catch-up payments are particularly onerous in the current environment as nearly all U.S. airlines struggle to return to profitability and cannot afford to make such contributions.
Some of Northwest's largest competitors have terminated their defined benefit contribution plans through the Chapter 11 bankruptcy process, turning responsibility for the plans over to the PBGC, a self-financed governmental corporation that partially insures failed pension plans. The PBGC recently reported a record deficit of $23 billion, which includes the cost of taking over pension plans at United Airlines and US Airways. The PBGC predicts a $40 billion deficit if other airline pension plans are terminated.
Northwest, the Air Line Pilots Association (ALPA) and several other airlines are working together to develop a solution to this challenge. The legislation will allow Northwest to achieve the second part of its three-part, long-term solution to the pension challenge it faces:
-- Receiving union concurrence to freeze defined benefit plans at current levels rather than terminating the plans. -- Making up the funding shortfall of the frozen plans over a longer period than current law allows. -- Establishing a defined contribution 401(k) retirement plan, to provide secure employee pension benefits going forward."The legislation introduced today will allow companies such as Northwest to fully honor the pension commitments made to employees and spare taxpayers, through the PBGC, from having to step in as guarantor of terminated pension plans." Newman continued. "This responsible solution, embraced by management and labor, is a far superior alternative to the job losses, substantial reductions in pension benefits and increase in airline bankruptcies that will inevitably occur if action is not taken soon."
Bye Bye--General Lee
