The Labor Department is investigating whether Northwest Airlines systematically shortchanged its employee pension fund over three years, then avoided having to make a $65 million payment to the fund by filing for bankruptcy protection just one day before the payment was due. All named Plaintiffs receive pensions from Defendant Northwest Retirement Plan for Contract Employees (the "Plan"). None of the figures jive for the present value of the Plan as of September 30, Learn about Northwest Airlines Pension Plan, including a description from the employer, and comments and ratings provided anonymously by current and former Northwest Airlines employees. Unfortunately, many companies choose to skimp now, relying on unknowable market performance or profits to save them later. the end of the year). The three biggest U.S. carriers have reported combined adjusted profits of about $47 billion over the past five years. Delta, which had emerged from bankruptcy protection just a few weeks prior, was in a similar position. Its first international flight was from the Twin Cities to Winnipeg in 1928, according to the Minnesota Historical Society (MHS). Northwest Retiree Benefit Trust exclusively for Northwest Airlines Retirees This booklet includes summaries of the benefits covered under the Northwest Retiree Benefit Trust for NWA Retirees, eligible Dependents and Survivors age 65 and older. But reviving old retirement plans would be a big new expense for the . In the meantime, take charge of your own finances. Those plans failed. A federal judge has denied dismissal of a lawsuit in which five former employees of Delta Air Lines allege Delta and its administrative committee improperly reduced their pension benefits from the Northwest Airlines Pension Plan for Contract Employees. But McClain said he doesn't believe the Northwest pensions are in jeopardy -- if Congress grants the airline a new, more lengthy payment schedule. The workers were rejecting the company's final offer of massive concessions, including 53% job cuts, 26% wage reductions and sharp cuts to their benefits and pensions. Good move from the consumers aspect. Notably, Northwest Airlines was the first U.S. airline to launch flights to mainland China after the Chinese Civil War, with one-stop services to Shanghai commencing in 1984. Bidens FAA Nominee Faces Military Waiver Challenge, Denver Airport CEO Phil Washington Tangles With Sen. Ted Cruz During FAA Confirmation Hearing, Fraport Tests Autonomous Baggage and Cargo Tractor, Aurrigo International Agrees to Electric Autonomous Vehicle Development Partnership with Singapore's Changi Airport Group, Birmingham-Shutlesworth International Airport Partners with Kuehne+Nagel to Expand Air Cargo Business in the Region. Oct.1, 2009, and the amount at the end of the year, Sep.30, 2010. MPR: Northwest retirees worried about their pensions Delta says pilots who got zeroed out already took a major portion of their pension benefits when they left the airline. 2023 Minnesota Public Radio | All rights reserved, Mark McClain of the Air Line Pilots Association talks with MPR's Bill Catlin about the pension situation. "They are making half a million dollars an hour, every hour of the day, every day of the year, every month, all year long," Mr. Carey said. Even though the Northwest Airlines brand has completely disappeared from aircraft and airports around the world, it would be wrong to put Northwest in the same category as failed airlines that suffered catastrophic bankruptcies or declines into irrelevancy. How it Works This is an immediate problem.". Ideally, this would make it simple for an airline to calculate the funds it needs saved up for each pilots pension. How to Find a Lost Pension Plan - US News & World Report Frozen pension plans can be re-activated if they are in compliance with. What he found inside was worse. Fortunately for Northwest, a solution emerged in one of its owners, KLM, with which it entered a strategic alliance. All rights reserved. Cochran, for instance, hopes to soon begin tapping a $1.2 million lump sum that he got when he retired almost three years ago and put into an IRA account. Northwest Airlines' bankruptcy filing has raised serious questions among workers and retirees about the pension benefits they've been promised. crippling the companys expansion efforts. Some of the delayed contributions are now starting to come due, and the airline has been lobbying Congress to give it still more time. Among the airlines that have come and gone over the years, Northwest Airlines ranks as not only one of the largest and most influential but also as one that went on to create something larger. Contract Employees) including benefits paid to retirees, Plan expenses, Plan Many products featured on this site were editorially chosen. Continental Airlines' plan was frozen before it merged with United, which continues to administer that fund, the union said. Service Provider information is on Pages 25 to 32, compensation for those Northwest Airlines Pension Plan for Salaried Employees (Salaried Plan), the Northwest Airlines Pension Plan for Pilot Employees (Pilot Plan), and the Northwest Airlines Pension Plan for Contract Employees (Contract Plan) (Collectively, the Plans), Located in Eagan, MN A Notice by the Employee Benefits Security Administration on 08/19/2003 The acquisition meant that Northwest now had a feeder network to keep the threat from United at bay, but it also turned out to be a complicated and costly purchase for Northwest Airlines. Many years ago, saving for retirement was simple. Page 39 Despite this assertion, a payment made to settle a legal claim is not the same relief as the payment Delta would have owed had the plaintiffs ultimately succeeded in their workers compensation actions. The name "Delta" would survive the merger, and the combined airline would serve passengers across the US and around the world with its multiple hubs. Learn about Northwest Airlines Pension Plan, including a description from the employer, and comments and ratings provided anonymously by current and former Northwest Airlines employees. Years ago, airline pilots got a great deal on their retirement, but things have changed. The committee defined payable as something that may, can or must be paid, and argued that because Delta paid the settlement, the underlying workers compensation benefit was something that can be paid. investment gains (loses) and Plan contributions from Delta, Plan assets at the Airlines have the luxury of planning for pilots to retire at the FAAs mandatory retirement age of 65. We recently examined the Four Percent Rule, the idea that if you only spend 4 percent of your nest eggs initial value per year, it should last you at least 30 years. Her husband is a retired Northwest pilot, and their family lives on his monthly pension checks. Court Advances Suit Regarding Delta Air Lines' Offset of Pension So, for the past three years the company has met the minimum contribution to the In the Audit, page 46, year ended Sept. 30, 2009, assets $1,738,184,000. "It was just too big a risk," said Lewis. pass it on to interested parties. In the motion, Northwest said it was "willing to cooperate fully" with the Labor Department but not unless the government gave it more forceful guarantees that confidential financial information would be kept private and not used "as leverage to pressure" it. A company would get in trouble with the government if it funded a pension plan too well, but if the plan is under-funded, it causes trouble for retirees. Northwest Airlines Pension Plan for Contract Employees (the Plan) from Delta Coleman says he thinks Congress could realistically act on pension reform legislation by the end of November. They're already overwhelmed," says Coleman. At the end of 2004,. Lewis also retired four years earlier than he had planned, in order to save his lump sum pension benefit, also $1.2 million. Therefore, this factor weighs in favor of plaintiffs, Ericksen wrote. Sign up and get the best of News delivered straight to your email inbox, free of charge. drop down from employee information), Retirement Pre-merger Northwest Pension Main Office He's too young to draw Social Security, and he had put the lump sum into an IRA that can't be reached without penalties for another year and a half. "They will look at people like us who retired with a good salary, who have medical insurance, who earned all these things," says Harris. send us a brief summary of the Plan (Northwest Airlines Pension Plan for Donate In its motion for a protective order against the Labor Department's subpoena, Northwest is arguing that the demand is "extremely broad" and that full cooperation could "threaten or undermine" its ability to reorganize in bankruptcy. However, not even a year after that, the merger of the two airlines was announced. You can find everything printed here in Deltanet Employee Connection (found on According to the court order, while employed by Delta, the plaintiffs suffered workplace injuries and filed claims for workers compensation benefits under Minnesota law. Trans World Airlines (2001) 10. Ideally, youd think that a responsible company would want to ensure theyre always on or above final glide for their pension obligations. Copyright 20082023, Glassdoor, Inc. "Glassdoor" and logo are registered trademarks of Glassdoor, Inc. Former Reservation Sales Agent in Minneapolis, MN, Minnesota. Agreement Language While it is theoretically possible that the committee made its decision for the purpose of putting Deltas financial interests over the interests of the beneficiaries, plaintiffs failed to plead facts that support such an inference. QDRO Preparation for NORTHWEST AIRLINES PENSION PLAN FOR - Qdro Desk pro rata share in the net assets of the Master Trust. But Ericksen found that this allegation fails to state a claim for breach of fiduciary duty because the plan and federal regulations require the committee to apply the plan provisions consistently to similarly situated claimants. Instead, airlines and other retirement planners hire special statisticians called actuaries to essentially do custom versions of the trinity study for each specific situation. 8. On April 14th, 2008, Delta Air Lines and Northwest Airlines (NWA) announced an agreement to merge and create a $17.7 billion enterprise. What will be the best performing asset class for 2023? She dismissed the plaintiffs ERISA claim for equitable relief. It lies in the arcane rules of pension termination --- and in a lucrative feature of Delta's pre-bankruptcy pilot contracts. You can send Jason questions at editorial@flying.media. They all retired from NWA after April 30, 1992, after having completed 10 years of vesting service. "That, in conjunction with freezing our pension plan that we've been in discussions to do, should provide the type of relief necessary to maintain the benefits we have." A hearing has been scheduled for later this month in United States Bankruptcy Court for the Southern District of New York, in Manhattan. In the meantime, he and his wife are considering going back to work or selling their house. Lets say a company expects to pay each retiree a more conservative $300,000 per year, it just multiplies that by 25 to see that it needs $7.5 million saved per pilot. Harris said she's worried about the possibility of losing income and insurance as Northwest reorganizes in bankruptcy. Airlines. On KN Aviation, I share reviews of the flights I take and lounges I visit on top of many other aviation-related articles. U.S. Investigates Pension Fund at Northwest Air Delta is the third major airline to dump all or part of its pension obligations as part of a recent Chapter 11 reorganization, after US Airways and United. "We'll survive somehow. At the same time, "we have a high demographic of middle-age pilots and we're approaching retirement age with insufficient pension security. Eagan, MN 55121-1534. You have the choice to enroll in Medical/Prescription Drug coverage, Dental coverage and Vision coverage. The industry has been in perpetual crisis. Pilots ready to win back retirement benefits lost in airline bankruptcies Norm Coleman, R-Minn., is one of the airline's allies on the issue, and co-author of a pension reform bill. The End of Pensions - The New York Times By 1989, as ill effects from the problematic integration of Republic Airlines had mostly subsided, Northwest was bought out by a consortium of investors that included KLM in a leveraged buyout that turned out extremely costly for the company. 3. The 10 Biggest Failed Pension Plans - US News & World Report A Northwest spokesman said yesterday that the company had provided some of the documents sought, but was fighting to keep others confidential, and was scheduled to appear in court later this month to argue for a protective order. Fiduciary duties to pension participants can sometimes collide with corporate officials' fiduciary duties to their shareholders, especially when a company is struggling financially and trying to conserve cash. The investigators appear to be tracing the steps that led to the pension fund's recent shortfall of $5.8 billion, and whether Northwest violated any laws. Federal Register :: Northwest Airlines Pension Plan for Salaried When Northwest Airlines and Delta Air Lines merged in 2008, they created the worlds largest airline, and one that to this date still ranks as the largest in several metrics including assets owned and market capitalization. . Will ETFs Ever Break Into the Retirement Plan Space. 612-726-3774. If you follow it, you should be safe. Ericksen noted that ERISA Section 502(a)(3) permits actions against fiduciaries who breach their fiduciary duties, and although the plaintiffs may not ultimately obtain duplicate recoveries under both Section 502(a)(1)(B) and (a)(3), they can plead alternate theories of liability under both provisions. my dad was there 50 years,, if nyrob ran northwest it would still be here today, Your email address will not be published. What was NWA cargo business like e.g., profitable, steady, etc.? Ideally, the company could over-fund the pension plan ahead of time as a buffer against an expected downturn. Contribution from Delta Airlines was $77,621,712. But, I am going to introduce you to a couple of ways you can experiment with to try a business class flight without having to spend thousands of dollars. Northwest received a waiver from the I.R.S. If youre like me, you have a flying habit that youll need support. But Joseph H. Grant, an agency official, said it was "working in close cooperation with the other federal agencies that oversee pension plan operations. The courts agreed and the airlines were able to use bankruptcy to escape any further obligation to fund their pension plans. Required fields are marked *. Trust. "First and foremost, we have to make sure that the pension obligations are met. That means Northwest hopes to bypass the Pension Benefit Guaranty Corp., a federal agency that takes over when employers default on their pension obligations. Vacation was skimpy to start, at 2 weeks paid, and after over 10 years climbed to 5 weeks. According to the court order, while employed by Delta, the plaintiffs suffered . Reproduction in whole or in part without permission is prohibited. Northwest Airlines was founded in 1926 as Northwest Airways and initially served as an airline focused on mail service before expanding into passenger service in 1927. NWA employees see Bush save pensions - Breaking Travel News I did some research for the missing information and thought that the honorable For suggestions and comments, please click the Contact link at the bottom of this page. The other: coupons to begin paying Delta $907 a month for his family's health insurance, since he no longer had a pension check from which to deduct it. Fortunately, Northwest Airlines successfully emerged from bankruptcy protection in 2007 after aggressively cutting costs and selling off assets. It goes through this procedure every time it hits the skies, and this inflicts stress on fuselage and wings. "I plan to live conservatively and keep our costs down and wait for the dust to settle," he said. Delta recently estimated that retired pilots' average benefit will still be $75,200 on an annualized basis after the termination --- a figure that assumes self-disciplined drawdowns from their lump sums. I know I have presented several questions, but I am just curious is all, and I enjoyed your article on NWA. Create an Account and Draft a QDRO for This Plan. in 2003, allowing it to reschedule that year's pension contributions over five years. Northwest Airlines Employee Benefit: Pension Plan | Glassdoor Technically, everything they did was legal. Retirees expected bad news, but many will get no more checks --- and have to pay for health coverage. It is important to remember that under this type of plan, the Alternate Payee is typically not awarded a lump sum cash payment from the Plan. But Delta moved to terminate the pilot plan anyway, and its pilots union had agreed not to object as part of a new contract deal. The Internal Revenue Service shares enforcement of the pension law, and it sometimes imposes excise taxes on companies that skip their pension payments. Home Retirement benefits at Fort Worth, Texas-based American will be high on the union's list of priorities during 2019 labor negotiations, Mr. Carey said. What happened to United Airlines pensions? - Rover Tip The standard for the U.S. airline industry is for the company to contribute an amount equal to 16 percent of a pilots pay to their 401(k) plan each month. "Delta's making enough money to keep the plan," said Lewis. If you look at the UAL pension default, their liabilities to their pension fund was $10Billion. PDF Northwest Retiree Benefit Trust exclusively for Northwest Airlines Retirees While Northwest Airlines evolved to become much more than a domestic and transpacific airline, it remained a pioneer in the Asian aviation market throughout its history as an independent airline. With its clear post-war focus on Asia, Northwest Airlines adopted the brand name Northwest Orient as it continued introducing new Asia routes and adding capacity with new aircraft. An official website of the United States government. Wendell Lewis, another retired Delta pilot whose monthly pension checks stopped, is part of a group headed by a former pilots union chairman that is appealing U.S. Bankruptcy Judge Adlai Hardin's approval of the plan termination. The plan defines workers compensation benefits as any periodic benefit payable. The committee argues that because the one-time lump-sum payment settles a claim for a periodic benefit, that one-time payment is also periodic.
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