Northwest provided that the Omnibus Agreement guarantees that the Plans always receive the greater of the initial contribution value of Pinnacle Stock or the value of the stock at the time of an IPO or the exercise of the Put Option. on Northwest stated that it would not. WebThe Plan provides that Northwest will determine whether the employee is totally and permanently disabled based on the employee's medical reports. Thus, the ALPA agreement will be formally entered into and effective on the date of the voluntary contribution. (c) A statement that the appraisal is being conducted to determine the fair market value of Pinnacle Stock, which is defined as the price at which the stock would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, and both parties are able, as well as willing, to trade and are well informed about the stock and the market for the stock. UNITED STATES DISTRICT COURT SOUTHERN By permitting the contribution of Pinnacle Stock, Northwest is able to preserve needed cash so that it can withstand several years of losses. This change generally reduces the length of the available Deferral when the Plans hold more than $325 million in Pinnacle Stock (measured as of the date of each contribution). The Independent Fiduciary represents that after extensive negotiations during November and December, 2002, and January, 2003, Fiduciary Counselors and Northwest, along with Pinnacle and NWA Corp., Northwest's ultimate parent company, entered into an Omnibus Agreement, dated January 15, 2003, which sets forth the terms and conditions pursuant to which Fiduciary Counselors will accept the Pinnacle Stock (the Contribution).[6]. Under the Omnibus Agreement, Northwest controls the timing of the IPO until the earlier of July 1, 2006 or the occurrence of an early termination event. Northwest retirees worried about their pensions This is primarily due to the fact that Southwest Airlines does not serve 2 of the 3 Northwest hubsMemphis (Pinnacle's largest market) and Minneapolis. 5. The Pilot Plan and its participants benefit from the voluntary contribution by providing an early contribution of an asset with significant Start Printed Page 49806value to more adequately fund the benefits promised under the Pilot Plan. Delta Air Lines Must Face Lawsuit Over Pension Payments The appropriate fiduciary of the Plans (other than the Independent Fiduciary) will determine that such investment will not impair the liquidity of the Plans such that the Plans would not be able to pay benefits and expenses when due. 3. (e) A statement of the relevance or significance accorded to the valuation methodologies taken into account. Eclat states in the January 15, 2003 Valuation that the valuation includes competitive, operational and financial elements essential to validating Pinnacle's current market viability as a Northwest regional partner and as a stand-alone airline and that the valuation describes the state of the regional airline industry, delves into some of the more important issues surrounding Pinnacle specifically, provides a brief financial review of the carrier, explains the valuation methodology, compares Pinnacle to Continental Express, and comments on the stability of Northwest. Northwest Response: Northwest explains that, while the Proposed Exemption and the Omnibus Agreement negotiated with Fiduciary Counselors do not require collateral, the Proposed Exemption and the Omnibus Agreement include provisions designed to limit the need for collateral. Eclat is an aviation-consulting firm that specializes in detailed analysis of the economic and financial issues that surround the industry. The shares were then allocated to individual accounts established on behalf of each eligible employee. In addition, the fiduciary obligation to act prudently requires, at a minimum, that the independent fiduciary conduct an objective, thorough, and analytical critique of the valuation. win back retirement benefits lost in airline bankruptcies However, because of its liquidity needs, a cash contribution is not a viable alternative. Northwest Airlines Pension Plan for Contract Employees Without modifications to the pilot collective bargaining agreement, the Proposed Exemption contemplated that the other two Plans would receive a contribution of Pinnacle Stock in an amount equal to the maximum amount permitted under section 407(a)(2) of ERISA, while the Pilot Plan would receive no contributions of Pinnacle Stock. Northwest Airlines: Employee Benefits and Perks | Glassdoor Signed at Washington, DC this 14th day of August 2003. The value of the transaction is enhanced due to the downside protection that this Put Option provides. Definitions at (a) of the Proposed Exemption in column 1 of 68 FR 2590, the reference to 5 percent (5%) of such fiduciary's gross income, for Federal income tax purposes, in its prior tax year, will be paid by Northwest should read 5 percent (5%) of such fiduciary's annual gross revenue in the year of its engagement, will be paid by Northwest.. northwest airlines pension See Omnibus Agreement, Definition of Early Termination Event at section 1.1. omakase strawberry seeds; marion county impact fees 2021; githens middle school yearbook documents in the last year, 1407 According to the IF Report, Eclat estimates that Pinnacle's value to the Northwest domestic system is between $520 million and $540 million annually as the carrier exists today. In response to the solicitation of comments from interested persons, the Department received over 1,700 letters, e-mails, faxes and phone calls, of which more than 1,000 requested that a public hearing be held on the Proposed Exemption. WebKondratowicz v. Northwest Airlines, Inc.-2-I. As a result of its review, certain changes were incorporated in the new Airline Services Agreement entered into on January 14, 2003 (ASA). Northwest Airlines Corporation (NWA Corp.) will guarantee Northwest's obligations under the Omnibus Agreement, including the Put Option. On December 11, 2007, Northwest and ALPA implemented the Money Purchase Plan for Pilot Employees (MP3), which replaced the Northwest Airlines Pension Plan for Pilot Employees. Additionally, the Independent Fiduciary corrects language in the fifth paragraph of the Voting Provisions of the Proposed Exemption that states a majority of Pinnacle's board is needed for the approval of compensation of Pinnacle's CEO. In the March 5 Comment, Fiduciary Counselors noted that, consistent with the statutory requirements of section 404(a) of ERISA, the reference in the Proposed Exemption to the best interests of the Plans participants and beneficiaries (emphasis added) should be changed to the interests of the Plans participants and beneficiaries. case no. Northwest represents that the amount of shares necessary to satisfy the required contribution was based upon a final valuation of Pinnacle by Fiduciary Counselors, relying on a valuation report prepared by Eclat Consulting. 03-21162 Filed 8-18-03; 8:45 am], updated on 4:15 PM on Friday, April 28, 2023, updated on 8:45 AM on Friday, April 28, 2023, 126 documents Northwest Airlines informational resource until the Administrative Committee of the Federal 612-726-3774. An additional provision that would prohibit Northwest from using its rights under the Series A Preferred Share to block a Transfer of Pinnacle Stock following an Early Termination Event. This prototype edition of the 04/28/2023, 39 from 40 agencies. Northwest believes this is the best outcome for all Plan participants and beneficiaries. travel symbol copy and paste Northwest Airlines Employee Benefit: Pension Plan Similar considerations will be taken into account by Fiduciary Counselors in determining whether to accept any future contribution of Pinnacle Stock. The Independent Fiduciary retained an independent, expert airlines valuation firm, Eclat, to provide valuation services. on FederalRegister.gov 3. Eclat used the Black-Scholes option-pricing model to determine the value of the Put Option. northwest airlines pension As Successor to Northwest Airlines, Inc., and Northwest Airlines Pension Plan for Contract Employees, Defendants, 10 Civ. The description of Northwest's right of first refusal with respect to Pinnacle Stock is accurate; however, if the Plans negotiate the sale of Pinnacle Stock to a third party for non-cash consideration, the Omnibus Agreement includes a specific valuation mechanism with respect to such consideration. If accepting an in-kind contribution is not prudent, not solely in the interest of the participants and beneficiaries of the plan, or would result in an improper lack of diversification of plan assets, the responsible fiduciaries of the plan Start Printed Page 49800would be liable for any losses resulting from such a breach of fiduciary responsibility, even if a contribution in kind does not constitute a prohibited transaction under section 406 of ERISA. 6. See Omnibus Agreement at section 11.2. Webnorthwest airlines retirement savings plan for contract employees Examples of this type of plan are 401(k), 401(a), Employee Stock Ownership Plan (ESOP), Savings Plans Pursuant to its engagement letter with Northwest, the scope of Fiduciary Counselors' engagement includes determining whether to accept the Contribution on behalf of the Plans, and if so, to value the Pinnacle Stock for Plan funding purposes. Company profile page for northwest airlines pension plan for contract employees including stock price, company news, press releases, executives, board members, and contact information Northwest also established major hubs at The Omnibus Agreement further requires that Northwest provide regular notice of its liquidity to Fiduciary Counselors. One of the strengths of the Northwest network is that the airline has the least exposure of any major carrier to low-cost carriers in the industry. Airline Employee's ERISA Claims Precluded by RLA *PBGC Benefit Application - When a participant terminates employment with United and wants to start their pension s/he needs to contact the Field Benefit Administrator (FBA). Prior to valuing the put option, Eclat's estimate of the value of Pinnacle was $333,436,072, after application of an illiquidity discount of 15% and a minority discount of 5%. Docket (#1) COMPLAINT against Adminstrative Committee for Delta Air Lines, Inc., Northwest Airlines Pension Plan for Contract Employees ( Filing fee $ 402 receipt number 0416-9445828. Northwest observed that the Term Sheet, as reflected in the Proposed Exemption, allows Northwest to defer the closing date with respect to Pinnacle Stock repurchased pursuant to the Put Option (such delay, a Deferral). Northwest Airlines Pension Plan for Salaried Employees Kondratowicz, a former customer-service agent for Northwest, is a participant in the Northwest Airlines Pension Plan for Contract Employees, which Northwest administers. In addition, section 404(a)(1)(C) requires that fiduciaries diversify plan investments so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. These negotiations resulted in agreements (Agreements) between Northwest and each of its unions under which Northwest would contribute to the Employee Stock Plan a newly created, special class of stock (the Series C Preferred Stock) in an amount that would equal the monetary value of certain wage and other concessions agreed to by the unions. rY0bR' u) Registration rights and Plan director's rights preserve the value of the Pinnacle Stock while held by the Plans. WebNORTHWEST AIRLINES INC. 2700 Lone Oak Pkwy. In its determinations, the Independent Fiduciary has also taken into account Northwest's request for a minimum funding waiver with respect to Plan contributions in 2003 and 2004, and considered the likelihood that such waiver will be granted. The Independent Fiduciary must ensure that all of the conditions above are satisfied with respect to any past contributions of Pinnacle Stock, as well as any future contributions. As a condition of the Proposed Exemption, Fiduciary Counselors, using the services of its independent appraisal firm Eclat, Start Printed Page 49802determined the value of Pinnacle Stock. Register, and does not replace the official print version or the official [8] Northwest adds that under ERISA sections 406 and 407, Northwest could have contributed the stock of its parent company (traded under the symbol NWAC) to satisfy its funding obligations without seeking an exemption. The right to engage an investment banker on behalf of the Plans in an IPO, at Northwest's expense. The selection of an independent qualified appraiser to determine the value of an in-kind contribution and the acceptance of the resulting valuation are fiduciary decisions governed by the provisions of Part 4 of Title I ERISA. This is because a regional airline derives its value from the value of its ASA with the major carrier and the major carrier is unlikely to terminate the ASA in bankruptcy because it would severely disrupt the flow of high yield passengers. As further noted in the Preamble, the parties to the Agreement shall notify the Department within 30 days of any decision regarding the resignation, termination or change in control of the Independent Fiduciary. for Contract Employees Pension Plan See Omnibus Agreement at section 9.1(d). Similarly, U.S. Airways did not reject its ASA with its regional airline partners Mesa and Chautauqua. Additionally, Northwest notes that the Letter Agreement between Northwest and ALPA relating to a voluntary contribution of Pinnacle Stock would provide ALPA with a role in reviewing and approving the termination, and any replacement, of the independent fiduciary. The Employee Stock Plan is a profit sharing plan that is tax qualified under section 401(a) of the Code and subject to ERISA. At the time a participant exercises conversion rights, the Series C Preferred Stock is converted to Common Stock, the Common Stock is sold and cash is allocated to participant accounts. In this regard, the Plans acquired Pinnacle Stock at a favorable price and the Plans obtained voting and management rights, anti-dilution rights, limits on Northwest's ability to terminate the ASA, rights to sell the Pinnacle Stock or dispose of it in an IPO in a variety of circumstances, and a protective Put Option. Thus, almost all of the Series C Preferred Stock that remains in the Employee Stock Plan is allocated to the accounts of employees represented by the IAM and IBT. Webdefined benefit pension, the IAM National Pension Plan, which takes the place of the company pension plan that was frozen as part of the bankruptcy restructuring. ). Fiduciary Counselors and its advisors negotiated with Northwest and Pinnacle concerning the ability of the Plans to transfer the Pinnacle Stock and the rights of the Plans to cause Northwest to register the shares of Pinnacle Stock under Federal and State securities laws for resale to third parties. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. WebPortuguese products available Online we mail to all lower 48 states. A decision to issue only additional Common Stock must be approved by a majority of the three directors elected by the holders of the Series C Preferred Stock. Each of Northwest's three main unions at the time of the Agreements also was granted the right to appoint one director to the Northwest board of directors. Northwest and ALPA assert that the voluntary contribution gives Northwest the liquidity it needs, and thereby the ability to maintain all of its Plans, by eliminating the funding requirement for the Pilot Plan for the 2003 Plan Year, possibly reducing the funding requirements for future plan years, and by waiving the monthly contribution requirement under the pilot collective bargaining agreement for the 2004 and 2005 Plan Years. WebPortuguese products available Online we mail to all lower 48 states. Wendy M. McColough of the Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor, telephone (202) 693-8540. 2678 (RPP) March 03, 2011 at 11:41 AM X In addition, a fiduciary must act for the exclusive purpose of providing benefits to participants and beneficiaries; must act prudently; and must diversify the investment of plan assets to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. The Proposed Exemption was requested in an application filed on Start Printed Page 49793behalf of Northwest pursuant to section 408(a) of the Act and section 4975(c)(2) of the Code, and in accordance with the procedures set forth in 29 CFR part 2570, subpart B (55 FR 32836, August 10, 1990). Comments: Commenters expressed a concern that the contribution of Pinnacle Stock involves a conflict of interest on the part of Northwest. Pinnacle contributed over $500 million in revenue to Northwest in 2002 and is expected to grow its regional jet flying approximately 30 percent per year through 2005. Additionally, ALPA requested that it be involved in the monitoring of the Independent Fiduciary. The Northwest Airlines Pension Plan for Contract Employees is approximately forty percent of the Master Trust. As with all domestic U.S. carriers, Northwest has been hit by the drop in revenue due to lower overall yields and depressed passenger levels. Information about this document as published in the Federal Register. Total cost is only $ 299.00. Archived News Release Caution: Information may be out of date. During the Hearing, employees of Northwest referenced an employee stock program that was established by the company in 1993. In view of the comments requesting a hearing, on March 11, 2003, the Department published in the Federal Register (68 FR 11589) a notice of hearing on the Proposed Exemption. WebIn addition to your DPSP, some pilots have qualified pension plan benefits being paid by the Pension Benefit Guaranty Corporation (PBGC) or through the Pre-Merger Northwest (PMNW) frozen pension, both with several payment options. Despite the turmoil in the industry in recent years, Eclat felt that Northwest has emerged as, perhaps, the most stable airline in the industry. In the Proposed Exemption, it was noted that the length of the Deferral would be shortened if Pinnacle Stock was publicly traded at the time that the Put Option is exercised. Register documents. 5. During the Hearing, the Department asked Northwest to provide information concerning the funded status of the Pilot Plan, Contract Plan and Salaried Plan at the end of 2002. In valuing Pinnacle Stock, the Independent Fiduciary specifically applied a 15% liquidity discount and a 5% discount to take into account that, for some period, the Plans would be a minority shareholder. The Pinnacle Stock contributed to the Pilot Plan will be held in a separate, segregated subaccount of the Master Trust and held for the exclusive benefit of the Pilot Plan. In addition, Pinnacle has an independent Board of Directors with one member appointed by Fiduciary Counselors, and the Fiduciary Counselors-appointed Board member is entitled to special voting rights on certain matters. Create an Account and Draft a QDRO for This Plan. 1. In addition to determining the value of Pinnacle Stock at the time of a proposed contribution, the Independent Fiduciary will provide an annual written valuation of the per share value of all Pinnacle Stock held by the Plans as of each December 31 and at any time the Independent Fiduciary exercises the Put Option described below. Since Northwest was prohibited from investing the Pilot Plan's assets in employer stock, the Pilot Plan at that time, did not participate in the investment fund. The Independent Fiduciary represents that the description of the valuation by Eclat Consulting (Eclat) of Pinnacle in the Proposed Exemption commencing in the second column of 68 FR 2580 (the Eclat Report) should be updated to reflect Eclat's valuation of Pinnacle as of January 15, 2003. Northwest ended the 3rd quarter with over $2.5 billion in cash and short-term receivables. On August 1, 2003, in response to the Department's questions concerning the legal restrictions that prevented Northwest from repurchasing the Series C Preferred Stock and whether these legal restrictions were tied to Northwest's financial condition, Northwest explained that in making the Series C stock repurchase decision, the board of NWA Corp. was subject to a Delaware law that applies only to NWA Corp.'s repurchase of its own stock. As the Plans' independent fiduciary, Fiduciary Counselors must act prudently and in the interests of the Plans and their participants. daily Federal Register on FederalRegister.gov will remain an unofficial Based on current client engagements, Fiduciary Counselors anticipates that the portion retained by it will comprise less than 5% of Fiduciary Counselors' gross revenue for 2003. Moreover, when the IPO of Pinnacle Stock occurs, the Plans may benefit from a potentially significant IPO premium with respect to their holdings of Pinnacle Stock. (c) The term control means the power to exercise a controlling influence over the management or policies of a person other than an individual. The Independent Fiduciary notes that the Proposed Exemption, in the first column of 68 FR 2580 (first full paragraph), makes reference to voting restrictions and limits on the ability of the Plans to dispose of the Pinnacle Stock, except pursuant to an initial public offering (IPO) initiated by Northwest or by exercise of the Put Option. on As noted in the June 27, 2003 letter from Northwest and ALPA to the Department, Northwest states that the Letter Agreement will be executed in connection with the voluntary contribution. NWA is the plan administrator and the employer plan sponsor The IF Report notes that Northwest is a global carrier through its alliance with KLM and its Amsterdam hub, and its own hub in Tokyo. 2578 Federal Register /Vol. 68, No. 12/Friday, January 17, 2. This is because a cash contribution is not a viable alternative given the company's liquidity needs. The requirement that the director nominated by the Plans approve any changes in the ASA will ensure that any modification of those terms is done only if the changes, taken as a whole, are favorable to Pinnacle and its shareholders, including the Plans. C:$' J{FR]L,`;\&P**yjTR0HqFxc"P8byLFNo?#k3NLzYX^|pNbdh>&b!CvICe%PD\Dm:9Q,ml}O Northwest represents that the final terms of the Omnibus Agreement reflect the fact that Fiduciary Counselors has represented the Plans' interests. Director, Office of Exemption Determinations, Employee Benefits Security Administration, Department of Labor. 1 0 obj<> endobj 3 0 obj<>stream Some commenters asked if Northwest would be willing to guarantee the Plans a minimum rate of return on the Pinnacle Stock such as a rate equal to the inflation rate. On January 11, 2003, the Independent Fiduciary and its advisors conducted a telephone interview with Pinnacle's chief executive officer and chief financial officer as part of its due diligence. In determining the fair market value of the stock, the Independent Fiduciary must obtain an appraisal by a qualified independent appraiser, and must ensure that the appraisal is consistent with sound principles of valuation. Accordingly, the fiduciaries of a plan must act prudently, solely in the interest of the plan's participants and beneficiaries, and with a view to the need to diversify plan assets when deciding whether to accept an in-kind contribution. The stock has long term upside potential because of the planned IPO. In negotiating the terms of the Contributions and determining whether to accept the Initial Contribution, the Independent Fiduciary, with its financial advisors and legal counsel, reviewed those documents that it deemed relevant, participated in meetings and telephone conferences with officers and other representatives of Northwest, and considered aspects of the Contribution that it deemed pertinent to its engagement, including without limitation Northwest's current and future ability to honor the Put Option. 04/28/2023, 153 corresponding official PDF file on govinfo.gov. In response to the commenters' concerns about the role of the independent fiduciary, the Department believes that it would be helpful to provide its views on the responsibilities of an independent fiduciary in connection with the in-kind contribution of property to an employee benefit plan. Investigates Pension Fund at Northwest These plans cover approximately 161,000 current and retired employees who could stand to lose billions in benefits if these plans were turned over to the Pension Benefit Guaranty Corporation (PBGC). The Plan provides that Northwest will determine whether the employee is totally and permanently disabled based on the employee's medical reports. [FR Doc. To exercise the Put Option, the Independent Fiduciary must provide written notice to Northwest of its election to put to Northwest any or all of the shares of Pinnacle Stock then held by the Plans. Northwest observed that the comments submitted to the Department raised several concerns regarding the contribution of Pinnacle Stock to the Plans, as contemplated by the Proposed Exemption. The Proposed Exemption is part of Northwest's strategy to achieve that goal. northwest airlines pension If the markets return, substantial upside will benefit the Plans. endstream endobj 4 0 obj<> endobj 5 0 obj[/Separation/PANTONE#20368#20C/DeviceCMYK 3 0 R] endobj 6 0 obj<> endobj 7 0 obj<> endobj 9 0 obj<>stream (c) Protective of the rights of the participants and beneficiaries of the plans. For purposes of this requirement, the term employer real property means real property leased to, and the term employer securities means securities issued by, an employer any of whose employees are covered by the Plans or by an affiliate of such employer; and. 7. The IF Report states that on January 15, 2003, Fiduciary Counselors determined that the Master Trust could accept a contribution by Northwest of 1,938,000 shares of Pinnacle Stock, valued at $43,821,894.00, on behalf of the Contract Plan on terms and conditions set forth in the Omnibus Agreement. Agencies - Pension and Welfare Benefits Administration (3) any corporation or partnership of which such person is an officer, director, partner, or employee. 612-726-3774. On July 23, 2003, Northwest confirmed to the Department that the modifications to the ASA referred to in the Proposed Exemption have been made. For ease of reference, Northwest refers to the Employee Stock Plan, but the factual discussion of the Series C Preferred Stock remains accurate after the merger with the Northwest 401(k) plans. WebThis booklet describes the Northwest Airlines Pension Plan forContract Employees (the Plan and the Contract PensionPlan). Aon Consulting internally allocated 25% of the fee to Fiduciary Counselors, which comprised less than 5% of its annual gross revenue in 2002. 04/28/2023, 244 Wisdom. Northwest Airlines Freezes Pension Plans Fiduciary Counselors assumed that since Northwest could take up to 180 days to settle the option that it would. The requirement (detailed in the last bullet point in the second column of the Proposed Exemption at 68 FR 2585) that Plan shares of Pinnacle Stock be voted in favor of certain corporate actions is now set to expire upon the occurrence of an Early Termination Event. The Term Sheet originally placed the right to request this fairness opinion solely on the Plans' director, who asked that this duty be placed on the independent directors of which the Plans' director is a member.

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