The
following is a 7 page document that the MEC put out answering the question
about the creation of a new Defined Benefit Pension Plan. Well, they concluded that its pretty much a
bust but at least they spent some time examining the question and it does
expose issues that we are all familiar with.
August 7, 2016
Can Delta Pilots Seek Establishment of a
New Defined Benefit Plan?
Prepared jointly by the Delta MEC R&I Committee and Strategic Planning Committee
For questions: DALRI@alpa.org
Introduction This paper was prepared at the request of the Delta MEC, in response to line pilot input. The question is whether or not it is possible to establish a defined benefit (DB) retirement plan for the Delta pilots. As you are probably aware, the establishment of a DB plan is not part of the Delta MEC’s current negotiating position. Your Negotiating Committee crafted its negotiating position based on the results of the pilot survey, ongoing pilot polling and MEC direction. Since we presented our opening position to Delta, a number of pilots have asked about the feasibility of establishing a new Delta pilot DB plan. What follows is a combination of the history of our past pilot DB plans and the requirements and challenges of creating a new DB retirement plan for Delta pilots.
Background
DB and DC Plans Generally. A Defined Benefit (DB) plan generally is a retirement plan that provides retired participants (and their surviving spouses, unless waived) with a specified, ongoing monthly retirement income for life. The level of monthly retirement income is based on a formula specified in the plan. The DB plan sponsor makes annual contributions to the DB plan trust to fund the benefits. Contributions are invested by a fiduciary; individual participants do not have a role in investing funds and may not borrow against or use such funds. Generally, payments to retirees are taxable but employer contributions to the plan are not. A Defined Contribution (DC) plan is a retirement plan that provides each participant with contributions to an individual account held under the plan in the participant’s name. The contributions and earnings from investment are payable to retired (and sometimes active) participants as monthly income or as a lump sum. Investment of the funds held in the DC plan may be directed by each individual participant. Generally, employer contributions are not taxable to participants when contributed, but are taxable when distributed to the participant; Roth contributions are taxable to participants, but Roth distributions are tax-free. The Delta pilots’ DC plan currently provides for Delta to contribute an amount equal to 15 percent of each pilot’s pay,
Can Delta Pilots Seek Establishment of a
New Defined Benefit Plan?
Prepared jointly by the Delta MEC R&I Committee and Strategic Planning Committee
For questions: DALRI@alpa.org
Introduction This paper was prepared at the request of the Delta MEC, in response to line pilot input. The question is whether or not it is possible to establish a defined benefit (DB) retirement plan for the Delta pilots. As you are probably aware, the establishment of a DB plan is not part of the Delta MEC’s current negotiating position. Your Negotiating Committee crafted its negotiating position based on the results of the pilot survey, ongoing pilot polling and MEC direction. Since we presented our opening position to Delta, a number of pilots have asked about the feasibility of establishing a new Delta pilot DB plan. What follows is a combination of the history of our past pilot DB plans and the requirements and challenges of creating a new DB retirement plan for Delta pilots.
Background
DB and DC Plans Generally. A Defined Benefit (DB) plan generally is a retirement plan that provides retired participants (and their surviving spouses, unless waived) with a specified, ongoing monthly retirement income for life. The level of monthly retirement income is based on a formula specified in the plan. The DB plan sponsor makes annual contributions to the DB plan trust to fund the benefits. Contributions are invested by a fiduciary; individual participants do not have a role in investing funds and may not borrow against or use such funds. Generally, payments to retirees are taxable but employer contributions to the plan are not. A Defined Contribution (DC) plan is a retirement plan that provides each participant with contributions to an individual account held under the plan in the participant’s name. The contributions and earnings from investment are payable to retired (and sometimes active) participants as monthly income or as a lump sum. Investment of the funds held in the DC plan may be directed by each individual participant. Generally, employer contributions are not taxable to participants when contributed, but are taxable when distributed to the participant; Roth contributions are taxable to participants, but Roth distributions are tax-free. The Delta pilots’ DC plan currently provides for Delta to contribute an amount equal to 15 percent of each pilot’s pay,
and any contributions in excess of the Internal Revenue Code (IRC) limit are paid to pilots in cash. To be clear about these differences, as we said above, pilots hold funds in their own name and choose investment options in DC plans; fiduciaries choose investment options for the entire fund in DB plans. All DC plan assets remain with the participants, while DB plan earnings in excess of obligations are not distributed to participants. Most pilot groups currently have DC plans, as well as the control associated with those plans. Presently, new hire pilots participate in only one ALPAnegotiated DB plan, at FedEx, and one other DB plan, at UPS.
Delta Maintains and Funds Frozen DB Plans. Delta presently maintains and funds four qualified DB plans. Under a qualified plan, contributions and earnings are exempt from tax and distributions to participants are taxable. All of these plans are frozen, meaning that participants have earned no additional benefits since the dates the plans were frozen and are entitled only to whatever the participants had earned at the time of the freeze. This is important because if Delta were to create a new DB plan, the IRS (which is responsible for regulating such plans) would consider the existence of the frozen plans in determining what obligations it might impose regarding the establishment of a new DB plan. Of the four frozen plans, the largest is the Delta DB plan for non-pilots. The other three are NWA DB plans (for pilots, contract employees and salaried employees). The NWA pilots’ DB plan, covering active and retired NWA pilots, was frozen on January 31, 2006, meaning that covered pilots will receive all of the benefits they had earned as of January 31, 2006. 1 All four of these qualified plans are maintained in accordance with the law that allowed airlines to extend the time to make contributions and increase interest assumptions so that they could more easily maintain the plans. The DB plan funding relief applicable to airlines’ frozen DB plans was instituted under the Pension Protection Act of 2006 (PPA). Under this law, funding of frozen airline DB plans is made over 1 7 years, and funding requirements are determined applying an interest rate that is higher than that required of all other DB plans. The 17-year periods will end in 2023 for the NWA DB plans, and in 2024 for the Delta DB plan, at which time the plans will have to switch to the regular funding rules under the Employee Retirement Income Security Act (ERISA) and the IRC. It is far more expensive to fund a DB plan under regular funding rules than under the PPA rules. This is important because if Delta were to create a new DB plan, the IRS could force Delta to immediately fund its frozen plans under regular funding rules rather than PPA rules, in order to make up for the additional liability generated by the creation of a major new DB plan.
Contributions to Fully Fund Frozen DB Plans. A rough estimate of Delta’s remaining cost to fully fund all four of its frozen DB plans is $9.3 billion. Using the most recently available public information2, that cost (using the regular funding rules) is as follows:
Billions
DAL Retirement Plan $5.18
NWA Pension Plan - Pilots $2.06
NWA Pension Plan - Contract Employees $1.86
NWA Pension Plan - Salaried Employees $0.20
Using the 17-year airline funding rules allowed under PPA 2006, it would still require
$3.4 billion to fully fund all four plans. At the end of the 17-year period the plans
would switch to the regular funding rules.
Termination of Delta Pilot DB Plans. On September 14, 2005, the date Delta filed bankruptcy, the Delta pilots’ nonqualified DB plans were terminated. Because nonqualified benefits are not protected by statute, pilots lost all of their nonqualified plan benefits that had not yet been paid by Delta as of September 14, 2005. On September 2, 2006, the Delta pilots’ qualified DB plan was terminated by order of the bankruptcy court. Plan assets and plan administration were transferred to the Pension Benefit Guaranty Corporation (PBGC), the federal agency responsible for determining and distributing benefits from terminated, underfunded DB plans and investing all plan assets. In 2010, the PBGC sent each pilot a letter advising the amount of benefits the PBGC would pay the pilot under the terminated DB plan, based on the assets and recoveries of the Plan and applicable law. At the time of termination, the plan was only about 36 percent funded, with $1.7 billion in assets and $4.7 billion in liabilities (as measured under the PBGC’s rules), but the PBGC obtained another $1.2 billion from Delta in bankruptcy.
PBGC Protections. If a new DB plan were established, it would not affect a pilot’s current PBGC benefit to be paid (or being paid) as a result of the terminated DAL DB plan. However, the IRS could impose limitations on benefits if, for example, the new DB plan falls below minimum funding levels. In that case, the IRS could impose a freeze on accruals under the new DB plan. Further, if the new DB plan also terminated in an underfunded situation and was administered by the PBGC, the PBGC’s “guarantee” amount (e.g., up to $60,136 per year at age 65, for plans terminating in 2016) would apply to the total of all guaranteed benefits the PBGC pays to each participant. So, if Delta ever terminated the new DB plan in an underfunded situation, and the new DB plan was taken over by the PBGC, a participant in both Delta plans administered by the PBGC would be limited to the single PBGC guarantee in place upon the second termination.
Additional Information. For a more complete explanation of NWA and Delta pilot retirement benefits, see the Delta MEC Retirement & Insurance Committee’s R&I
Report 11-01 - History of the Retirement Plans at Northwest and Delta
Termination of Delta Pilot DB Plans. On September 14, 2005, the date Delta filed bankruptcy, the Delta pilots’ nonqualified DB plans were terminated. Because nonqualified benefits are not protected by statute, pilots lost all of their nonqualified plan benefits that had not yet been paid by Delta as of September 14, 2005. On September 2, 2006, the Delta pilots’ qualified DB plan was terminated by order of the bankruptcy court. Plan assets and plan administration were transferred to the Pension Benefit Guaranty Corporation (PBGC), the federal agency responsible for determining and distributing benefits from terminated, underfunded DB plans and investing all plan assets. In 2010, the PBGC sent each pilot a letter advising the amount of benefits the PBGC would pay the pilot under the terminated DB plan, based on the assets and recoveries of the Plan and applicable law. At the time of termination, the plan was only about 36 percent funded, with $1.7 billion in assets and $4.7 billion in liabilities (as measured under the PBGC’s rules), but the PBGC obtained another $1.2 billion from Delta in bankruptcy.
PBGC Protections. If a new DB plan were established, it would not affect a pilot’s current PBGC benefit to be paid (or being paid) as a result of the terminated DAL DB plan. However, the IRS could impose limitations on benefits if, for example, the new DB plan falls below minimum funding levels. In that case, the IRS could impose a freeze on accruals under the new DB plan. Further, if the new DB plan also terminated in an underfunded situation and was administered by the PBGC, the PBGC’s “guarantee” amount (e.g., up to $60,136 per year at age 65, for plans terminating in 2016) would apply to the total of all guaranteed benefits the PBGC pays to each participant. So, if Delta ever terminated the new DB plan in an underfunded situation, and the new DB plan was taken over by the PBGC, a participant in both Delta plans administered by the PBGC would be limited to the single PBGC guarantee in place upon the second termination.
Additional Information. For a more complete explanation of NWA and Delta pilot retirement benefits, see the Delta MEC Retirement & Insurance Committee’s R&I
Report 11-01 - History of the Retirement Plans at Northwest and Delta
Legal Issues
Creation of New DB Plan. The creation of a new DB plan for pilots would have to clear several legal hurdles. On August 17, 2006, less than one month before the Delta pilots’ DB plan was terminated, President Bush signed the PPA into law. As we noted above, the PPA made it easier for airlines to continue funding their frozen DB plans over a longer period of time, and using a higher interest discount rate in calculating liabilities than applies to other plan sponsors. (Using a higher interest discount rate results in lower liabilities and lower contributions.) As a result, Delta is currently obligated only to fully fund its four frozen DB plans over 17 years using the higher interest discount rate (rather than over seven years using lower interest rates). By using these special funding rules, airlines save tremendous amounts of money over the 17-year period as compared to the contributions they would be required to make over the regular seven-year period using the lower current interest discount rates. As stated above, beginning in 2023 for the NWA DB plans and 2024 for the Delta DB plan, these plans must switch to the regular funding rules under the PPA. Under those rules, the unfunded liability will be calculated using what are likely to be lower interest rates at that time which will require higher contributions to be funded over a new seven-year period. As part of its bankruptcy settlement agreement with the PBGC, Delta was prohibited from establishing a new defined benefit plan for pilots during the five-year period following Delta’s exit from bankruptcy on April 30, 2007. That restriction expired on May 1, 2012, so it is no longer an impediment to a new DB plan for Delta pilots.
Status of New DB Plan Uncertain. A point of uncertainty with significant consequences is the possibility that a new DB plan might be determined to be nonqualified. For a plan using 17-year airline funding, the PPA allows the Secretary of the Treasury to determine if the new plan is nonqualified for federal tax purposes. Such a ruling would have a material negative effect on plan participants, since the full value of benefits would be taxable to participants in the year those benefits became vested. Although the PPA states that the Secretary of the Treasury “may” determine that the new DB plan is nonqualified, it does not require such a determination. As a result, we do not know what would occur. If Delta were to revoke using the 17-year funding relief at any time before September 30, 2023 (the end of the 17-year period for the NWA DB plan for pilots), this provision of the PPA would no longer apply. However, such revocation itself requires the consent of the Secretary of the Treasury.
Possible Changes Required by IRS. Legal issues affect Delta’s ability to establish a new DB plan and raise questions that are not yet answered. Like any employer, Delta would need to apply to the IRS for approval before establishing a new qualified DB plan. However, because Delta maintains four frozen plans subject to the special 17- year funding, it is simply uncertain what action the IRS would require Delta to take before it approves a new DB plan covering pilots. This is unknown territory. The IRS has never issued any regulations on these provisions of the PPA, and we have found no.
Creation of New DB Plan. The creation of a new DB plan for pilots would have to clear several legal hurdles. On August 17, 2006, less than one month before the Delta pilots’ DB plan was terminated, President Bush signed the PPA into law. As we noted above, the PPA made it easier for airlines to continue funding their frozen DB plans over a longer period of time, and using a higher interest discount rate in calculating liabilities than applies to other plan sponsors. (Using a higher interest discount rate results in lower liabilities and lower contributions.) As a result, Delta is currently obligated only to fully fund its four frozen DB plans over 17 years using the higher interest discount rate (rather than over seven years using lower interest rates). By using these special funding rules, airlines save tremendous amounts of money over the 17-year period as compared to the contributions they would be required to make over the regular seven-year period using the lower current interest discount rates. As stated above, beginning in 2023 for the NWA DB plans and 2024 for the Delta DB plan, these plans must switch to the regular funding rules under the PPA. Under those rules, the unfunded liability will be calculated using what are likely to be lower interest rates at that time which will require higher contributions to be funded over a new seven-year period. As part of its bankruptcy settlement agreement with the PBGC, Delta was prohibited from establishing a new defined benefit plan for pilots during the five-year period following Delta’s exit from bankruptcy on April 30, 2007. That restriction expired on May 1, 2012, so it is no longer an impediment to a new DB plan for Delta pilots.
Status of New DB Plan Uncertain. A point of uncertainty with significant consequences is the possibility that a new DB plan might be determined to be nonqualified. For a plan using 17-year airline funding, the PPA allows the Secretary of the Treasury to determine if the new plan is nonqualified for federal tax purposes. Such a ruling would have a material negative effect on plan participants, since the full value of benefits would be taxable to participants in the year those benefits became vested. Although the PPA states that the Secretary of the Treasury “may” determine that the new DB plan is nonqualified, it does not require such a determination. As a result, we do not know what would occur. If Delta were to revoke using the 17-year funding relief at any time before September 30, 2023 (the end of the 17-year period for the NWA DB plan for pilots), this provision of the PPA would no longer apply. However, such revocation itself requires the consent of the Secretary of the Treasury.
Possible Changes Required by IRS. Legal issues affect Delta’s ability to establish a new DB plan and raise questions that are not yet answered. Like any employer, Delta would need to apply to the IRS for approval before establishing a new qualified DB plan. However, because Delta maintains four frozen plans subject to the special 17- year funding, it is simply uncertain what action the IRS would require Delta to take before it approves a new DB plan covering pilots. This is unknown territory. The IRS has never issued any regulations on these provisions of the PPA, and we have found no.
examples where an airline has established a new DB plan while funding its frozen DB
plans over 17 years under the PPA.
Because Delta currently maintains these four frozen plans under the advantageous
provisions of the PPA, the IRS may require some changes or additional restrictions in
order to permit a new DB plan to be established. The IRS could withdraw the relief
provided by the PPA which was intended to help the employer maintain the existing
frozen plans. Alternatively, prior to allowing a new DB plan, the IRS could require
Delta to shorten its 17-year funding period, or to fully fund any or all of its frozen DB
plans. In short, neither ALPA nor Delta can guarantee IRS approval of a new DB plan,
nor do we know whether the IRS will withdraw PPA relief, a decision which would add
billions of dollars to the cost of establishing a new DB plan.
Financial Issues
DB Plan Costs. Establishment and maintenance of a new DB plan would come at a significant expense to the corporation and would require a significant shift in our current negotiating priorities. While there would be PBGC premiums, and legal and actuarial fees, the key factor in determining cost is the size of the DB benefit that is negotiated. Under the terminated DB plan’s benefit formula, a pilot’s benefit at age 60 was equal to 60 percent of his Final Average Earnings (FAE) after 25 years of service (YOS). Some pilots have asked about establishing a DB plan that recognizes all past and future service, with benefits determined under the old formula. In order to do so, a plan would have to consider the benefits that a pilot has already become eligible to receive. This would obviously include benefits the pilot is eligible to receive under the terminated Delta Pilots DB plan (PBGC benefits) and the frozen NWA Pilots DB plan. Perhaps not so obvious, it would also include the value of all DC plan contributions that a pilot has received up to the point of establishing a new DB plan. For each of these amounts received as a cash payment, the present value would have to be calculated using an assumed rate of return. Then, the value would have to be converted to an assumed annuity payment. Due to the wide range of data that would have to be gathered and analyzed, the initial cost of the new plan would be difficult to calculate but would unquestionably be very high (i.e. in the billions). That cost is without regard to Delta’s cost to fund its other frozen DB plans or to make any additional funding to those plans that the IRS might require. Let’s assume, instead, that the proposal is to establish a new DB plan with benefits determined under the old formula, but based only on future service and without reduction for other benefits. The first year annual cost of that plan is estimated to be in the neighborhood of $400 million, and the cost would increase over time. For the sake of comparison, the annual cost of the pilots’ current 15 percent DC plan is approximately $350 million. In other words, the cost of even a pared-down DB plan that does not recognize prior service would be well over a billion dollars for a threeyear agreement. This raises a number of questions for the negotiators. It is possible, and even likely, that Delta will ask for restraint on other compensation-related items such as pay and
Financial Issues
DB Plan Costs. Establishment and maintenance of a new DB plan would come at a significant expense to the corporation and would require a significant shift in our current negotiating priorities. While there would be PBGC premiums, and legal and actuarial fees, the key factor in determining cost is the size of the DB benefit that is negotiated. Under the terminated DB plan’s benefit formula, a pilot’s benefit at age 60 was equal to 60 percent of his Final Average Earnings (FAE) after 25 years of service (YOS). Some pilots have asked about establishing a DB plan that recognizes all past and future service, with benefits determined under the old formula. In order to do so, a plan would have to consider the benefits that a pilot has already become eligible to receive. This would obviously include benefits the pilot is eligible to receive under the terminated Delta Pilots DB plan (PBGC benefits) and the frozen NWA Pilots DB plan. Perhaps not so obvious, it would also include the value of all DC plan contributions that a pilot has received up to the point of establishing a new DB plan. For each of these amounts received as a cash payment, the present value would have to be calculated using an assumed rate of return. Then, the value would have to be converted to an assumed annuity payment. Due to the wide range of data that would have to be gathered and analyzed, the initial cost of the new plan would be difficult to calculate but would unquestionably be very high (i.e. in the billions). That cost is without regard to Delta’s cost to fund its other frozen DB plans or to make any additional funding to those plans that the IRS might require. Let’s assume, instead, that the proposal is to establish a new DB plan with benefits determined under the old formula, but based only on future service and without reduction for other benefits. The first year annual cost of that plan is estimated to be in the neighborhood of $400 million, and the cost would increase over time. For the sake of comparison, the annual cost of the pilots’ current 15 percent DC plan is approximately $350 million. In other words, the cost of even a pared-down DB plan that does not recognize prior service would be well over a billion dollars for a threeyear agreement. This raises a number of questions for the negotiators. It is possible, and even likely, that Delta will ask for restraint on other compensation-related items such as pay and
profit sharing in order to help fund the new DB plan. It is more than possible that the
National Mediation Board (NMB) will regard Delta’s insistence on such a trade-off for a
major new compensation commitment to be reasonable. If so, that will add a major
new complication to negotiations.
Timing From a timing standpoint, we would not know for several months to years whether and in what circumstances Delta could establish a new DB plan for pilots. Delta would have to know what conditions the IRS would require with respect to Delta’s four frozen DB plans before it could determine the necessary requirements for implementing a new DB plan for pilots. Delta must negotiate the provisions and then go to the IRS to see what the IRS would require. If we negotiate an agreement, we cannot anticipate that Delta would estimate the cost of the agreement until it received notice of IRS approval and notice of any conditions the IRS might impose on the new plan or the four frozen plans. Beginning in 2016, Delta may apply to the IRS for a ruling, but it can’t implement the new DB plan.
Summary Delta pilots could attempt to establish a new DB plan in negotiations with Delta, but the choice to make that attempt would mean a significant diversion of time and money from the current bargaining path. The central issues are the high cost of establishing a new DB plan and the lengthy delays that would be necessary to secure regulatory approval. Securing regulatory approval from the Internal Revenue Service (IRS) would be expected to take months and, more likely, years. The IRS has regulatory authority to establish new DB obligations because such obligations could eventually become the responsibility of the government. Because some retired Delta and NWA pilots receive benefits from terminated and frozen DB plans and federal legislation allows Delta to extend its payments to fund the frozen benefits and to make favorable interest rate assumptions, the IRS may insist that the extended payment schedule for the old frozen plans be accelerated, and based on more realistic interest rates. A simple change such as adjusting the payment period from 17 years to 7 years, or to immediate funding, would cost Delta billions. The cost of establishing and funding a new DB plan comparable to the old Delta plan, with credit for past service, would be several billion dollars over the course of a three-year agreement. In the years since 9/11 , no carrier with frozen or terminated DB plans has reestablished a DB plan. The only carrier which agreed to establish a
new DB plan for pilots was UPS in 1998 and, in that case, the pilots were added to a plan which was already in place for another work group. And UPS, unlike Delta, had no financial obligations from frozen or terminated plans. Aside from the need for IRS approval, pilots will need to consider whether it is realistic to believe that Delta would agree to this costly new obligation voluntarily.
Timing From a timing standpoint, we would not know for several months to years whether and in what circumstances Delta could establish a new DB plan for pilots. Delta would have to know what conditions the IRS would require with respect to Delta’s four frozen DB plans before it could determine the necessary requirements for implementing a new DB plan for pilots. Delta must negotiate the provisions and then go to the IRS to see what the IRS would require. If we negotiate an agreement, we cannot anticipate that Delta would estimate the cost of the agreement until it received notice of IRS approval and notice of any conditions the IRS might impose on the new plan or the four frozen plans. Beginning in 2016, Delta may apply to the IRS for a ruling, but it can’t implement the new DB plan.
Summary Delta pilots could attempt to establish a new DB plan in negotiations with Delta, but the choice to make that attempt would mean a significant diversion of time and money from the current bargaining path. The central issues are the high cost of establishing a new DB plan and the lengthy delays that would be necessary to secure regulatory approval. Securing regulatory approval from the Internal Revenue Service (IRS) would be expected to take months and, more likely, years. The IRS has regulatory authority to establish new DB obligations because such obligations could eventually become the responsibility of the government. Because some retired Delta and NWA pilots receive benefits from terminated and frozen DB plans and federal legislation allows Delta to extend its payments to fund the frozen benefits and to make favorable interest rate assumptions, the IRS may insist that the extended payment schedule for the old frozen plans be accelerated, and based on more realistic interest rates. A simple change such as adjusting the payment period from 17 years to 7 years, or to immediate funding, would cost Delta billions. The cost of establishing and funding a new DB plan comparable to the old Delta plan, with credit for past service, would be several billion dollars over the course of a three-year agreement. In the years since 9/11 , no carrier with frozen or terminated DB plans has reestablished a DB plan. The only carrier which agreed to establish a
new DB plan for pilots was UPS in 1998 and, in that case, the pilots were added to a plan which was already in place for another work group. And UPS, unlike Delta, had no financial obligations from frozen or terminated plans. Aside from the need for IRS approval, pilots will need to consider whether it is realistic to believe that Delta would agree to this costly new obligation voluntarily.
Conclusion
Many, if not all, of these issues represent new ground for Delta pilots, Delta, the IRS,
Department of the Treasury, PBGC, and others. The timeline and implementation are
likely to last years, and the value of a new DB plan would include not only the value
paid out to Delta pilots, but also possible changes to the funding of Delta’s frozen DB
plans. The IRS would be asked to rule on a number of issues that it has never ruled on
before. The speed with which it would make those rulings involving billions of dollars
is unknown. Would Delta’s resistance to this proposal be viewed by the NMB as
reasonable, and is it realistic to believe the NMB would pressure Delta on this issue
through the threat of a release?
It is perfectly legal to demand the reestablishment of a DB plan. However, there are
major obstacles and complications to achieving this objective. This includes the fact
that we do not know whether the IRS would even approve the establishment of such a
plan or whether it would add to the costs of establishing such a plan by modifying or
rescinding the funding relief provided to Delta under the PPA. Even if we are able to
deal with these problems, the costs of establishing even a pared-down version of the
old Delta pilots’ DB plan adds major new costs to compensation demands, which Delta
will likely resist and which the NMB may be unwilling to support.or
quickly.
+++++++++++++++++++++++++++++++++++++++++++++
From: Wbrindell@aol.com
To: DWSkjerven@aol.com
Sent: 8/24/2016 1:24:06 P.M. Central Daylight Time
Subj: Fwd: A Day Late and a Few Hundred Thousand Short
To: DWSkjerven@aol.com
Sent: 8/24/2016 1:24:06 P.M. Central Daylight Time
Subj: Fwd: A Day Late and a Few Hundred Thousand Short
Typical government response to a problem----just throw money at
it.
Retention bonus pay for Air Force pilots could swell above $400,000
Jeff Daniels | Friday, 19 Aug 2016 | 2:07 PM ETCNBC.com
Air Force Thunderbirds
Fighter pilot retention bonuses could soar
to record heights of $400,000 or more, if the U.S. Air Force has its way.
"Currently, we have a need to retain
fighter pilots that we have," said Ann Stefanek, a spokeswoman for the
U.S. Air Force. "Whenever the economy is better, there are job
opportunities that pilots can take advantage of."
According to the Air Force, the pilot
shortage is expected to worsen and result in a shortfall of more than 700
pilots by the end of September. Without any action, the Air Force estimates it
will be more than 1,000 fighter pilots short by 2022.
Airline pilot shortage
The Navy and Marine Corps are facing a
similar challenge as the airlines offer high-paying jobs to fill cockpit
positions. The carriers are looking to expand fleets and dealing with a
national shortage as aging pilots approach their mandatory retirement age of
65.
Aviation continuation pay, as it's formally
known in the Air Force, is for terms of five or nine years for midcareer pilots
who agree to remain in the service.
The Air Force's current annual bonus of $25,000 per year for
pilots who decide to stay in the service has been in place since 1999 and never
adjusted for inflation. The president's budget called for that bonus to nearly
double to $48,000 per year, which would mean Air Force pilots who re-up for
nine years could net $432,000.
There's even a possibility the annual bonus
could go higher.
Defense budget
Under a House version of the fiscal 2017
National Defense Authorization Act, aviation incentive pay could go up to
$60,000 per year once those eligible pilots extend their tour of service. The
Senate version of the bill doesn't spell out the bonus but a conference
committee of lawmakers could decide to include it in the final bill.
The House-Senate conference committee last
met in July to discuss the proposed $600 billion-plus defense budget. Congress
is currently in recess until after Labor Day.
Meantime, the Air Force points to studies
that suggest the retention bonus "take rate" goes up when the
retention pay increases.
"This is not for all pilots,"
said Stefanek, explaining that some years there's a need for more mobility
pilots or more fighter pilots. "There's been a need for it in the fighter
community as long as I can remember."
'Quiet crisis'
Top Air Force brass highlighted the fighter
pilot retention issue last month in an op-ed posted on Defense One.
"Aside from an airline hiring surge,
there are other reasons for the Air Force's pilot shortfall, from dramatically
reduced flying hours for the high-end fight as a result of Pentagon budget cuts
to a perceived falloff in quality of life when they return from deployments
overseas," wrote Air Force Secretary Deborah Lee James and Air Force Chief
of Staff Gen. David Goldfein.
Added James and Goldfein, "Make no
mistake, this is a quiet crisis that will almost certainly get worse before it
gets better."
Dustin Franz | For The Washington Post |
Getty Images
At present, the Air Force produces roughly
1,200 pilots per year.
Moreover, it's not only pilots but
maintenance technicians where there's a big demand in the private sector,
according to the Air Force officials.
Boeing is projecting global demand
will remain strong over the next 20 years for commercial aviation personnel due
to the delivery of thousands of new jetliners. In North America, the aerospace
giant sees the demand for qualified commercial aviation pilots during this
period approaching 112,000 aviators and globally topping 600,000. As for
maintenance technicians, Boeing projects North America will require 127,000
personnel and worldwide that figure is nearly 680,000.
The airline pilot shortage has led to some
regional carriers losing staff to mainline airlines. At the same time, there
have been reports the pilot shortage in the civilian space has led to some
carriers eliminating smaller prop planes from their fleets.
++++++++++++++++++++++++++++++++++++++++++++++
Thanks to John for
a big caution and HL retraction on post about the Lemon peel healing power!
Date: 8/7/2016 12:04:39 PM
Subject: Hi, Mark. On lemons. John
Hensler
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