Compliance March 3, 2006

AK Steel Charged $46M for Miscalculated Pension Benefits

March 3, 2006 (PLANSPONSOR.com) - AK Steel Corp. has been ordered to pay at least $46.2 million to 1,250 former employees in a class action lawsuit over miscalculated lump sum pension benefits.
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The Associated Press reports that US District Judge Sandra Beckwith of the US District Court for the Southern District of Ohio ordered AK Steel to pay around $37.6 million in damages and $8.6 million in pre-judgment interest, along with post-judgment interest accruing at the rate of 4.7% per year until the payment is made.   An attorney representing the plaintiffs says post-judgment interest is accruing in the amount of about $6,000 per day over the entire class.

In a notification to the Securities and Exchange Commission AK Steel said that it intends to appeal the ruling, according to the AP. The company also said that if its appeal does not succeed, the payments to class members may have a “negative impact on the company’s consolidated financial position, results of operations and cash flows.”

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The 2002 lawsuit had charged that the company miscalculated lump sum pension payments to retired participants of its Retirement Accumulation Pension Plan.   The plaintiffs all retired or were terminated on or after January 1, 1995, and got their pension benefits in a lump sum by April 1, 2005.

Administration March 2, 2006

Delta Contributes $321 Million to Retirement Plan

February 27, 2004 (PLANSPONSOR.com) - Delta Air Lines chipped in $321 million to the company's retirement plan, but Delta's chief financial officer (CFO) says help is still needed from the halls of the US Congress.
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With the contribution to the Delta Retirement Plan, the Atlanta-based airline has exceeded the minimum required contribution for the calendar year, bringing total 2003 contributions to $325 million.   The company does not anticipate making any additional contributions to that plan during the remainder of 2004, but plans to contribute approximately $115 million to the Delta Pilots Retirement Plan, bringing total pension plan contributions to approximately $440 million for the year, according to a news release.

Delta has voluntarily prefunded the Delta Retirement Plan for the second consecutive year, a decision the air carrier said it made “in order to provide greater assets for payment of participant benefits and investment return, thus potentially providing an added level of security to the benefits already earned by plan participants.”   In March 2003, Delta prefunded the Delta Retirement Plan with a contribution of $76 million.

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“Delta’s decision to voluntarily prefund the Delta Retirement Plan this year, as we did last year, also provides the company with more level plan contribution requirements in the near term,” M. Michele Burns, the company’s executive vice president and CFO said in the release.

Delta also announced plans to meet minimum funding requirements in 2004 for the Delta Pilots Retirement Plan, which is determined separately from the Delta Retirement Plan. Both the Delta Pilots Retirement Plan and the Delta Retirement Plan were funded to at least 80% for ERISA current liability purposes as of July 1, 2003.

Political Agenda

In addition to announcing the latest contributions, Burns took the opportunity to lobby for a deficit-reduction contribution (DRC) holiday.   “Delta’s decision to prefund the Delta Retirement Plan does not, however, lessen the need for Congress to promptly enact needed pension funding and interest rate relief as contained in pending legislation,” the CFO said in the news release.

Specifically, Burns was speaking to the Pension Stability Act that has received approval from both bodies of Congress, with one glaring exception (see  Senate Passes Pension Funding Bill ).  While the Senate version contains the controversial DRC provisions – a provision that would offer companies with severely underfunded pension plans a two-year reprieve from the stringent funding provisions under the DRC (see  PBGC Calls Out DRC Modifications ).  The US House of Representatives passed a similar relief bill last October – by an overwhelming 397-to-2 margin – without the controversial DRC bailout provision (see  US House Solidly Approves Pension Funding Bill ).   Both sides have yet to reach a compromise on the issue and the White House has threatened veto is the DRC relaxation provisions are attached.

Even with staunch opposition from President Bush and the nation’s private pension fund insurer, the US Pension Benefit Guaranty Corporation (PBGC),Fitch Ratings has came out and said a relaxation on the rules is necessary to “help ease airline liquidity pressures.”   Fitch estimated that the largest US air carriers collectively face an unfunded pension liability of more than $20 billion (see  Fitch: Pension Bills Could be Big Help for Airlines ).

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