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CCH® PENSION AND BENEFITS — 6/19/07

Baucus, Grassley question recently enacted airline pension relief provisions

Senators Max Baucus (D-MT) and Chuck Grassley (R-IA) have called on CEOs of American and Continental Airlines to detail the benefits their companies will receive from provisions added to the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act (H.R. 2206; P.L. 110-28), signed into law on May 25, 2007. Baucus is Chairman of the Senate Finance Committee and Grassley is the ranking Republican.

Section 6615 of the Act permits pension plans of air carriers that continue to accrue benefits for active workers to use an interest rate of 8.25% to calculate the plans’ target liability for ten years, effective for the first plan year beginning after December 31, 2007. This provision was not included in either the Senate or the House version of the legislation, nor was it considered by the Senate Finance Committee, which has jurisdiction over pension issues.

“These two airlines flew around the Finance Committee to get this pension provision in the spending bill, but we will review in the light of day exactly what deal they got,” said Baucus in a news release.

Information sought by SFC leaders

The Senate leaders are requesting that, by June 15, 2007, the CEOs provide the Finance Committee with the following information for each of the plan years beginning in 2008 through 2017 for each plan eligible for the relief under the Act:

• Projected minimum required contributions determined without regard to the additional relief in H.R. 2206 and
• Projected minimum required contributions based on the provision in H.R. 2206.

Other information is also sought, including the number of active, retired, and terminated vested participants in each plan and the number of participants in each category with accrued benefits in excess of the amount that the PBGC would guarantee if the plan terminated in a distress termination on the most recent valuation date, and the amount of the excess.

For more information on this and related topics, consult the CCH Pension Plan Guide.

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