Re: Hoot Gibson Article on Airline Flying and age 60 rule
Chris, that kind of depends on if the pension plan is "frozen" like we did at Northwest which was only possible by a change in pension law that came down to the wire and, to our mangement's credit, donated two DC-9s to carry pilots to DC and meet with congress folks (of course Northwest wanted to keep the plan to avoid having the Pension Benefit Guarntee Corporation from having a seat on the board of directors and being a creditor). The law change allows a more realistic interest rate assumpiton and spreads out the number of years the company has to make good on the pension. Of course Northwest as a stand alone airline won't survive that long but if a merger occurs, say with American, the new carrier would have to make good on the obligation. And since our plan is frozen no more obligation is being incurred by the company. So we stopped digging a hole for ourselves and made it easier to begin digging out.
If the retirement age goes to 65 the actuarial tables will reduce the amount of funding required to "fully fund" the plan.
But what is fully funded? That does NOT mean if the company shuts down today all pension benefits for those retired or still working will be met. Fully funded means that IF the plan earns a certain amount of earnings per year, and IF the company is able to make the payments required to meet the future obligation, the plan is considered "fully funded". The Bush administration wanted to change the law to require enough money in the plan to provide all benefits until the last employee dies TODAY, which would kill all defined benefit plans. That was their goal. Former Treasury Secretary Snow, who gets about $450k from his defined benefit plan and was credited with about 15 more years of service than he actually had, is on record as saying defined benefit pension plans for LABOR (not management) are a "drag" on the economy and must be eliminated to make us "competitive" in labor costs (we have to be cheaper than the Chinese).
So making me work longer while not earning any more retirement money while not being retired as long if I go to 65 will allow the company to put less money in the fund. It would probably go to executive bonuses!
Ron
Chris, that kind of depends on if the pension plan is "frozen" like we did at Northwest which was only possible by a change in pension law that came down to the wire and, to our mangement's credit, donated two DC-9s to carry pilots to DC and meet with congress folks (of course Northwest wanted to keep the plan to avoid having the Pension Benefit Guarntee Corporation from having a seat on the board of directors and being a creditor). The law change allows a more realistic interest rate assumpiton and spreads out the number of years the company has to make good on the pension. Of course Northwest as a stand alone airline won't survive that long but if a merger occurs, say with American, the new carrier would have to make good on the obligation. And since our plan is frozen no more obligation is being incurred by the company. So we stopped digging a hole for ourselves and made it easier to begin digging out.
If the retirement age goes to 65 the actuarial tables will reduce the amount of funding required to "fully fund" the plan.
But what is fully funded? That does NOT mean if the company shuts down today all pension benefits for those retired or still working will be met. Fully funded means that IF the plan earns a certain amount of earnings per year, and IF the company is able to make the payments required to meet the future obligation, the plan is considered "fully funded". The Bush administration wanted to change the law to require enough money in the plan to provide all benefits until the last employee dies TODAY, which would kill all defined benefit plans. That was their goal. Former Treasury Secretary Snow, who gets about $450k from his defined benefit plan and was credited with about 15 more years of service than he actually had, is on record as saying defined benefit pension plans for LABOR (not management) are a "drag" on the economy and must be eliminated to make us "competitive" in labor costs (we have to be cheaper than the Chinese).
So making me work longer while not earning any more retirement money while not being retired as long if I go to 65 will allow the company to put less money in the fund. It would probably go to executive bonuses!
Ron
Comment