Hotline Update – Saturday December 3, 2011
This is APFA Communications Coordinator Jeff Pharr with the hotline update for Saturday December 3, 2011. APFA President Laura Glading is preparing for Monday’s meeting with the US Trustee where she will petition for a seat on the Creditors Committee.
The question currently circulating is “Will our travel benefits be taken away?” During Chapter 11, everything is subject to reorganizing. While we will not know the outcome until the court approves the final business plan, no other airline has removed their travel benefits through bankruptcy.
As mentioned in yesterday’s update, we expect speculation as to American’s future from a variety of sources throughout this process, and we will continue to share with you all of the information we have available.
Questions concerning pensions and retirement continue to be the most frequent inquiries coming in to APFA. A set of Pension questions and answers has been posted on APFA.org. For today’s Hotline, rather than linking to the document, we’ll include the most current pension information within this Hotline.
Please continue to check the Bankruptcy Section of APFA.org for the latest information.
WHAT HAPPENS TO MY PENSION?
- What happens to the Pension Plan now that American has filed for bankruptcy?
- What is the funding status of the Pension Plan?
- Can the Retirement Plan be terminated?
In addition, the Pension Benefit Guaranty Corporation (PBGC), the federal government agency that administers and guarantees certain pension benefits, could act on its own to terminate the Retirement Plan (a so-called “involuntary termination”), if it determines that the plan has not met applicable minimum funding standards or will be unable to pay benefits when due, or determines that its possible long-run loss in providing guaranteed benefits under the plan will increase unreasonably if the plan is not terminated.
The Employee Retirement Income Security Act of 1974, as amended (ERISA), requires that the plan administrator provide 60-day advance written notice to all affected parties of its intent to terminate a plan.†If the PBGC is advised that the proposed plan termination violates a Collective Bargaining Agreement and that the termination is being challenged under procedures specified in the Collective Bargaining Agreement, the PBGC will suspend the termination proceeding until resolution of the challenge.†However, the PBGC still has the authority to proceed with an involuntary termination, if the requirements of an involuntary termination are met.
- What are the requirements for a “standard termination,” and how are plan assets allocated in that event?
- What are the requirements for a ìdistress terminationî?
- The entity is in liquidation in bankruptcy, or the entity is in reorganization in bankruptcy, and the bankruptcy court determines that unless the plan is terminated the entity will not be able to pay its debts pursuant to a plan of reorganization and will be unable to continue in business outside the reorganization process, and the court approves the plan termination, or
- The PBGC determines that termination is required to enable the entity to pay its debts and continue in business, or
- The PBGC determines that termination is required for the entity to avoid pension plan costs that have become unreasonably burdensome solely as a result of a decline in the entityís workforce covered by all of the entity’s pension plans.
- If the PBGC does take over the pensions, how is my pension calculated?
- What is the PBGC maximum?
- Will the impact of a bankruptcy on our pensions be different for different age groups in our workforce?
- I pulled a pension estimate projecting my pension if I retire in two years. Is that dollar amount insured if the pension goes to the PBGC?
- We currently have several different options when selecting how we want to receive our pension, such as Level Income Option, Period Certain, etc.†Will these all still be available options if the PBGC takes over the plan?
- Are the only choices for the court in bankruptcy to turn the pension over to the PBGC (termination) or to keep it as is?
- What happens to American’s stock in bankruptcy?
WHAT HAPPENS TO RETIREE MEDICAL?
- What happens to our retirement health and life insurance benefits under Chapter 11 bankruptcy?
Section 1114 covers Union and non-Union retiree health and life insurance benefits. The procedures are similar to Section 1113.
- How are retiree medical benefits affected by a bankruptcy?
A filing does not have an immediate impact on retiree medical benefits. They are not guaranteed by a governmental agency. However, they are part of the Flight Attendant Collective Bargaining Agreement. A Company may not modify benefits unless APFA agrees to such modification or unless the court specifically authorizes modification. Similar to the requirements that must be met to modify any Collective Bargaining Agreements, the bankruptcy code sets certain procedures to obtain permanent modifications to these benefits.