Benefits March 17, 2009

Frontier asks Judge to Permit 401(k) Match Suspension

March 17, 2009 (PLANSPONSOR.com) - Frontier Airlines on Monday filed a complaint in U.S. Bankruptcy Court accusing the union that represents its pilots of now turning its back on an existing agreement allowing the air carrier to stop its 401(k) match.
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An Associated Press news release said the Denver-based airline, which has been reworking its business operations while under Chapter 11 bankruptcy protection since April, 2008, indicated in the court document that the 401(k) match deal with the pilots would have saved Frontier $1.7 million last year and $7 million over the life of the agreement.

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The complaint says three pilots filed grievances because Frontier did not follow a different provision of their contract that calls for it to “true up” any shortfalls in the company match during the year. However, the company responded by saying that when it told the union that the grievances were without merit, the union claimed the “true up” provision of the contract remained in effect.

“In effect, the pilots have argued that the (union contracts) only allow Frontier to defer such payments to the end of each calendar year, but that Frontier’s pre-(bankruptcy) petition obligation to match pilot contributions is otherwise unchanged,” the company said in its complaint . ” Instead of millions of dollars in savings, Frontier is entitled to zero, according to the union.”

So, in its court filing, Frontier asked a bankruptcy judge to order that:

  • no matching contributions are owed by Frontier to the 401(k) Plan for the portions of 2008 during which the plan was suspended and for 2009; and
  • only reduced matching amounts are due for 2010 through 2012.

The Associated Press said it was not able to reach a representative of the pilot union for a response.

The Frontier court filing is available here .

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