Legislative and Political Report

Déjà Vu All Over Again

Lawmakers seek to change rules regarding pension funding.

Air Line Pilot, June/July 2005, p.32

Pension troubles in the U.S. airline industry reflect a disturbing trend for U.S. workers in general. Nearly half of all pension plans in the United States have been terminated in the past decade.

“ALPA firmly believes that passage of this bill is the only solution remaining to prevent termination of the pilots’ defined-benefit retirement plan. Without this relief, the plan will terminate, and the pilots will lose significant retirement benefits. In addition, significant liabilities under the plan will be transferred to the Pension Benefit Guaranty Corporation. Plan termination would also create new doubts and uncertainty surrounding the airline’s effort to reorganize, despite the enormous reductions in pay, benefits, and employment that all the unions…have reached voluntarily in negotiations with management.”

No truer words have been uttered in testimony before the United States Senate. Unfortunately, Congress failed to heed this warning, which came not recently, but in January 2003, when ALPA’s president, Capt. Duane Woerth, brought attention to the looming pension crisis in the airline industry. His main goal was to get help for US Airways pilots, who had invested much in their company’s future, only to see their pensions in the crosshairs.

Fast-forward nearly 2 1/2 years, and the song unfortunately remains very much the same. In May, United Airlines won a federal court ruling allowing it to terminate all four of its employee pension plans and unburden itself of $9.8 billion in pension liabilities. Under an agreement that the airline negotiated with the PBGC and the federal bankruptcy court, the PBGC assumed $6.6 billion in underfunded pension liabilities in exchange for a $1.5 billion stake in the company. Another $3.2 billion came from a reduction in benefits for airline employees (with the pilots’ plan accounting for $1.5 billion).

United now joins US Airways on the list of terminated pilot pension plans. Despite fevered efforts of friendly lawmakers and a great grassroots turnout by US Airways pilots, the bill that Capt. Woerth praised in 2003 failed to pass, and the airline was forced to terminate its pilots’ plan that year and its nonpilot plans in 2005. The effort did yield a bill that gave the rest of the U.S. airline industry 2 years of breathing space, but the air is getting thin, and the need for true reform is threatening more carriers. 
Delta, American, and Northwest are warning that they could be next. Those airlines say that the pension rules in place could well drive them into bankruptcy. Doug Steenland, Northwest Airlines CEO, has said that his airline may have to file for bankruptcy if Congress does not change pension laws.

Pension troubles in the U.S. airline industry reflect a disturbing trend for U.S. workers in general. Nearly half of all pension plans in the United States have been terminated in the past decade, and according to the American Benefits Council, only about 41 million U.S. employees are now covered by traditional defined-benefit plans. In fact, many newer airlines do not offer defined-benefit pension plans to their employees.

“We need to reform this system now,” warns Capt. Woerth. “Our case is proven--and the Congress must act swiftly to end the carnage.”

The airline industry has been especially hard hit as economic difficulties have made it much harder for carriers to make their required contributions to defined-benefit employee pension plans. ALPA has, for 3 years, aggressively pursued legislative solutions that would take some of the pressure off airlines in an effort to avoid bankruptcies, prevent pension plan terminations, and preserve the retirement benefits of airline employees.

Treating 60 Right

ALPA is also pulling out all the stops to help pilots whose plans have been terminated, especially when it comes to the reality that pilots must retire at age 60. Unfortunately, when a plan is terminated under the current rules, ERISA benefit guarantees payable from the PBGC to pilots are actuarially reduced because they must retire at age 60 instead of the PBGC’s “normal” retirement age of 65.

The union has been working closely with Sen. Daniel Akaka (D-Hawaii) to promote a parallel legislative effort that would change the PBGC’s rules so that pilots’ benefits from terminated plans would not be reduced. Age 60 pilots would receive higher benefits calculated at levels that assume they had already reached age 65. Sen. Akaka introduced that bill, S.685, in March. Log into crewroom.alpa. org to learn more and to add your voice to the fight.

Airlines, too, are throwing their lobbying clout behind efforts to change existing pension funding rules. The recent cooperative attempt on the part of airlines and ALPA to initiate a reform of pension laws indicates what many hope will be a turning point in labor/management relations. The effort by both sides to address common interests has proven very effective and has resulted in important legislation currently before Congress.

In April, a bill was introduced on Capitol Hill that would reform many of the outmoded pension rules that threaten the economic viability of U.S. airlines. Sen. Johnny Isakson (R-Ga.), who sits on the Senate Committee on Health, Education, Labor, and Pensions, and Sen. Jay Rockefeller (D-W.Va.), who sits on the Senate Finance Committee, introduced the Employee Pension Preservation Act of 2005, which would give airlines a chance to amortize their pension payments.

“The Isakson/Rockefeller bill comes not a minute too soon, and ALPA applauds its support for pilots and other airline workers,” says Capt. Woerth. “Airlines and all of their employees are facing a growing crisis regarding their defined-benefit pension plans.”

ALPA has sought to correct the funding rules of the Employee Retirement Income Security Act of 1974 (ERISA), which do not allow employers a sufficient amortization period for deficit-reduction payments or a realistic assumption of future interest rates. The rules require airlines to make excessively large payments at a time when they can least afford it, making employee pension plans too costly for some carriers to maintain and jeopardizing the hard-earned retirement benefits of pilots.

“Because of a combination of economic factors and impractical pension rules, airlines are under tremendous pressure to freeze or terminate their defined-benefit pension plans,” says Capt. Woerth. “Furthermore, if airlines do not receive the benefits of the reforms contained in the Isakson/Rockefeller bill, more of them may be forced to seek Chapter 11 bankruptcy protection, putting additional airline employee jobs and pension plans at risk. From the public policy perspective, the PBGC and taxpayers will face even greater pension-liability exposure from terminated plans.”

ALPA is aggressively backing this legislative effort, but it will take a whole lot more to taste victory. As the summer unfolds, ALPA members are urged to visit to stay up-to-date and to use the Action Alert button provided to add their voice to the grassroots lobbying effort.--Pete Janhunen, Publications Manager

ALPA-Backed Bill on FFDO Program Passes House

The U.S. House of Representatives recently passed legislation that would significantly enhance the Federal Flight Deck Officer (FFDO) program. Rep. Peter DeFazio (D-Ore.) and Rep. John Mica (R-Fla.) introduced the enhancement in an amendment to the Department of Homeland Security Authorization Bill (H.R.1817), which would authorize $34.2 billion in fiscal year 2006 for programs that defend the nation against terrorism.

“The DeFazio-Mica amendment,” says ALPA’s president, Capt. Duane Woerth, “would create a test program to allow FFDOs to transport their weapons on their person rather than in a lockbox, establish an appeals process for any FFDO whose status the Transportation Security Administration revokes, require that the TSA issue badges to FFDOs, require that the TSA give eligible pilots more flexibility on training dates and improved access to training facilities, and require qualification standards for facilities at which FFDOs can receive re-qualification and recurrent training.”

The legislation is now in the Senate awaiting further consideration. It has been referred to the Senate Homeland Security and Governmental Affairs Committee, which is expected to conduct hearings before the bill is placed before the full Senate for a vote.

“ALPA worked closely with the amendment sponsors,” says Capt. Woerth, “and if it becomes law, it will help ensure that the remarkable success of the federal program that qualifies screened, trained, and deputized pilots to carry a firearm continues to grow in the future.”

The amendment addresses many concerns raised by ALPA and other critics of the program. ALPA has long been an advocate of the enhancements contained in the bill and is urging Congress to pass the legislation to provide for increased security on airliners.

“The FFDO program is a crucial element in our efforts to protect passengers and crewmembers against terrorism,” says Capt. Steve Luckey (Northwest, Ret.), chairman of ALPA’s National Security Committee. “The DeFazio-Mica amendment is an important advancement in our attempts to upgrade the program. We hope Congress will act quickly so that improvements can be implemented as soon as possible.”--Gavin Francis, Staff Writer