Benefits January 27, 2012

AMR Retirees Ask to Participate in Bankruptcy Case

January 27, 2012 (PLANSPONSOR.com) - A group of non-union AMR retirees asked a federal bankruptcy judge to let them participate in the bankruptcy case of AMR, American Airlines and other AMR subsidiaries.
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The retirees have formed an organization, the AMR Retirees Pension Protection Corp., “for the purpose of protecting the retiree benefits and pension benefits” they earned while working for the businesses, according to the Dallas Morning News. In a filing, the group asked U.S. Bankruptcy Judge Sean Lane to appoint a retiree committee “to act as the authorized representative of non-union retirees” in the case.  

The Pension Benefit Guaranty Corporation (PBGC) this week pushed back on what it says are misleading statements to American Airlines employees by its management about their pension plans. American’s recent statements, through its lead bankruptcy counsel and in employee communications, have signaled the airline’s intent to dump its retirement obligations on the PBGC, the agency claims. “American said nothing’s been decided yet, but didn’t even bother to pretend that it was trying to preserve its employees’ pensions,” said J. Jioni Palmer, PBGC’s director of communications.  

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Last week it was reported that AMR made only a small fraction of the roughly $100 million payment it was scheduled to contribute to the company’s employee pension plans (seeAmerican Airlines Makes Reduced Pension Payment).  

A recent letter to employees from management downplayed the serious consequences of what could happen if the company terminated its pension plans, Palmer said. The letter ignored that PBGC doesn’t insure retiree health benefits, which are usually canceled when companies terminate pension plans.

American also downplayed the pension cuts that would occur if American's plans are terminated and PBGC benefits are substituted. The agency has said, based on its estimates, American Airlines employees could lose a billion dollars in pension benefits if American terminates its plans (see PBGC: American Airlines Bankruptcy Could Hurt Financial Position).  

In their filing, the retirees indicated they don't like the signs they're getting from their former employer. "Although the Debtor has not yet made any formal application to this Court to terminate or modify retiree benefits in these cases, the Debtors' filings leave little doubt that such efforts will be undertaken in these cases," the filing said, according to the Dallas Morning News.  

"Accordingly, it is respectfully submitted that the formation of a Retiree Committee is appropriate now so that Retirees are properly in a position to protect their interests and are not forced to scramble to catch up if the Debtors file a motion to modify or terminate retiree benefits," the group stated.  

The news report said Allied Pilots Association told its retirees that the interests of working pilots and retirees may conflict and that the APA will not represent retired pilots. In contrast, the Transport Workers Union (TWU) has assured its retirees that the TWU will represent retirees and current employees alike.
Administration January 27, 2012

Panel Recommends Change to Actuarial Measures for CPP

January 27, 2012 (PLANSPONSOR.com) – A study found the actuarial obligations of the Canada Pension Plan (CPP) should be measured by using an approach that reflects the partially funded nature of the Plan.
 
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The study, “Measuring the Financial Sustainability of the Canada Pension Plan,” which was released by the Office of Chief Actuary, was undertaken on the recommendation of the CPP independent peer review panel.

Independent peer reviews of actuarial reports on the CPP are conducted to ensure the credibility of the information presented in the reports. The review panel, selected by Government Actuary’s Department (GAD) of the United Kingdom, recommended in May 2011 that only an actuarial balance sheet on an open group basis appear in the actuarial report, rather than the results of both the open and closed methods.

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The partially funded Canada Pension Plan represents a social contract where every year current contributors allow the use of their contributions to pay current beneficiaries’ benefits. In recognition of this, the open group approach to the CPP balance sheet was introduced for the first time in the most recent actuarial report on the CPP. This approach takes into consideration all current and future participants of the plan by including their contributions and associated benefits in determining whether current assets and future contributions will be sufficient to pay future expenditures.

“The actuarial balance sheet, based on future contributions and associated benefits, confirms that the Plan will continue to meet its financial obligations and is sustainable over the long-term,” says Jean-Claude Menard, chief actuary. “The independent peer review is an essential part of ensuring the high standard of actuarial accountability that Canadians have come to expect and I would like to thank the panel for its work and recommendations.”

The Office of the Chief Actuary operates independently within the Office of the Superintendent of Financial Institutions (OSFI) and provides actuarial services for key pension plans such as the CPP and the Old Age Security and pension and benefit plans that cover public servants, the Canadian Forces and members of Parliament among other groups.

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