More Pension and  FICA items         A lot of interesting info is on this page but may be a long scroll down.
FICA/Medicare Lawsuit participants: We are in the process of finalizing the content of our lawsuit, to be filed with the Court of Federal Claims. If you have forwarded your check for $250, we also must have in our possession a copy of your Cover Letter and Denial Letters (include the signature page.) We must have proof of your filing a form 843. Any proof will suffice, such as a denial letter, or a copy of the form 843 and a certified mail receipt. We already sent those of you on our email list, a Cover Sheet for you to complete, in MicroSoft WORD format. Please complete it, save it and then send it as an attachment to: Denis O'Malley dj.omalley@cox. net and Lou Balestra snickersba@aol. com and Pete Sofman psofman@gmail. com Please also scan in any Denial Letters you've received from the IRS, as .pdf files, and then send them also as attachments to Denis, Lou and Pete. If you are unable to create the .pdf files, please send copies of your Denial letters or other necessary documents, via Priority Mail to : Wm.S.Koopmann 2612 Kit Place Fort Collins, CO 80526 I will convert to the proper format and email them to Denis, Lou and Pete. Respectfully, Koop Koopmann Treasurer, Medicare/FICA Refund Committee Make your check payable to: Medicare/FICA Refund Committee mail your checks to: The Profit Center c/o Medicare/FICA Refund Committee 350 East 7th Street Suite 12 Loveland, CO 80537 Koop FICA__________ 2/25/09 Words of wisdom? Let's see where I put them. First, expect to get the initial denial saying there is no "basis" or "provision" to return your money, and that your filing is too late, should have been done years before you stopped getting the Non-Quals. After that, you have a right to appeal that decision to IRS Appeals. I just found out that the Appeals "Officers" are not from the real IRS, but are supposed to be independent U.S. Officers capable of deciding the case, on the merits, alone. I also found out that they are told not to grant refunds to retired United pilots, so that seems to be that. Kind of tells them they're not really what they are supposed to be, and generally, they don't like it and are sympathetic to us. Still, they're putting in their 20 yrs for retirement, and except for 1 in 1000, they won't rock the boat, but one might, some day. After the initial denial, which will tell you you can appeal (to those Appeals people who can't approve), you write the letter challenging their reasons for denial, and making your legal case for the Court, if it ever goes there. If you don't challenge a point of denial, there is a chance that they might argue that you didn't object, thus accepted it. They surely don't believe a Judge will buy that B.S., but legally, they would be correct. I call that the Formal Protest letter, which is required when we protest the income tax assessments they send. It may not be necessary to call it that, but it can't hurt, and makes the process legally correct. Next, you'll get the Final denial letter, saying you can now sue, which means you've finished the administrative remedy procedures, and can now be accepted as a plaintiff in a suit against the Government. I have a new Formal Protest letter that should be finished, and up in the RETUP FICA Files, soon, if I get a bit of time to polish it up. No matter what you do, you'll be denied, unless the new Administration changes the policy, which is not out of the question. Get everything in writing, and don't go in to see them, because it will just waste time and gas, and there will be no written evidence that can help you; so just play the game. That's all there is to it. Denis Friday, December 22, 2006  Retired Pilots - Do not ignore a notice from California Taxing Agency! The California Franchise Tax Board has issued balance due notices to several retired pilots. The notices contend that the income tax that was withheld and shown on some United Airlines W-2(s) was not paid to the state of California and therefore the retired pilot would not be able to claim the withholding as a credit against income tax due. . Clearly a systemic problem was in the making when several clients called me. When I contacted the PRO office at the California Franchise Tax Board stating several cases with the same problem, the investigation started. . Within 24 hours the problem was identified but NOT resolved. Apparently the California tax agency has not received the transmission of forms that identified those individuals. On the other hand the tax agency was just about ready to refund over $300,000 to United Airlines for overpaid withholding taxes. . I have managed to get the assessments I know about put on hold until the problem can be resolved and abated. The tax agency is working directly with United Airlines payroll department. It is unknown how many notices have been issued at this time which will require intervention. For my clients, if you should receive a notice, pl ease e-mail your name and the account number as shown on the notice and I will forward it to the Franchise Tax Board. Also send me a copy of the California Franchise Tax Board notice. Robert Kern, EA PO Box 25210 San Mateo, CA 94402-5210 650-573-5800 x 301 800-262-5376 x 301 800-886-6348 (Fax) mailto: kerntax@aol.com KernTax (WebSite) Following these letters and notes is a comprehensive letter from Bob Falco. We hope it clears up our confusion, I received an email from Bob Falco, last week, discussing the "FICA Refunds" as we have been calling them. Below is shortened and slightly edited excerpts from that email. You may have to read it a couple of times because you have to think differently to understand and explain taxes. My apologies to Bob if I "worked it" too much. The reason this IRC 3121 is referred to as the "Special Timing Rule" is that it ALLOWS the IRS to withhold FICA taxes on ones imputed lifetime benefits (being treated as EARNED INCOME) in the year one retires. Now I know you are saying so what is new here. Let me try to elaborate. There is a difference in earned income and unearned income. There is also a difference between FICA taxes and MEDICARE Taxes. Let me make a hypothetical example to try to differentiate: A employee with an annual salary of $60K retires and has a non-qualified retirement plan. The FICA limit in his/her retirement year is lets say $85K. This employee will have FICA taxes withheld up to the FICA limit ($85K) in his/her retirement year, because the IRS considers the imputed income in the retirement year to be added to the EARNED INCOME. In addition, the employee is charged MEDICARE TAX (Old Age Hospital Insurance or HI) on the total imputed lifetime benefits, as the income is considered EARNED INCOME. Henceforth the "Special Timing" nomenclature, given to the rule by accountants, because the tax is collected in the year of retirement. When one draws future benefits from a deferred compensation plan, that is not forfeited, such income is no longer considered EARNED INCOME; it is considered UNEARNED INCOME, even though it is reported on a W-2 form, as opposed to a 1099-R form, for retirement benefits. Being considered unearned income, there is no FICA tax responsibility by the recipient, since all the FICA tax, along with the Medicare Tax on the total imputed lifetime benefit, was all charged under the special timing rule (Section 3121), then none of these taxes are withheld when one receives the benefits. Our situation is unique in that very, very few pilots did not MAX out on their FICA tax obligation in their retirement year. So the only tax we were required to pay under IRC 3121 special timing rule was the Medicare Tax. Virtually all of our guys refer to this overpayment of taxes incorrectly as they use the term FICA as opposed to MEDICARE TAX. I do believe that, for those who stay the course, the best chance of obtaining the overpayment of the Medicare Taxes is through the APPEALS process which is not bound by the IRS's Chief Council's interpretation. The appeals, conducted face to face based on the element of fairness, in my opinion, will be our strongest trump card. If it goes beyond the appeal process than I think our chances fall below 50/50 and we will definitely need some influential individuals (Senators and Congressman) in our corner. I don't know if I shed some insight into this mess or not, but we ALL must get on the same page and not flip flop the terminology (FICA as opposed to MEDICARE TAX) when we sit down with our face to face appeal. Bob Falco Read on down. From:  Bob Falco On Apr 2, 2007, at 4:11 PM, boomer2993@optonlin e.net wrote: I only have time to say this ONCE. The FICA check that some of us are getting has absolutely NO relationship with the overpayment of Medicare Tax on our imputed lifetime benefits from the terminated non-qualified plan. I ran across this the other day and it seems to be the answer to why some of us are getting this check from good ol UAL: About a year and a half ago your R&I Committee discovered that UAL had been improperly deducting(and paying their share of FICA taxes) on sick and disability pay that employees received fro more than 6 calendar months after the employee ceased active work. By law, no FICA taxes are owed on sick/disability pay after the first 6 full calendar months following cessation of active employment. UAL immediately stopped the FICA tax deduction error of deduction as applicable and this week they notified ALPA that they woul attempt to recoup this money. A letter, dated November 1, 2003, is going out to 4500 affected employees, approximately 587 pilots, who along with United paid FICA tax in error. The Company will be seeeking a refund of FICA taxes paid, for the years 1997 through 2001. The total refund being sought is $3.6million - $1.8 million for the Company and $1.8 million for the 4500 affected employees. The Company will forward the employees' share to the affected employees upon receipt of the refund, and will issue corrected W-2's. After review with legal councel it is the view of the R&I Committee that affected pilots should sign the certification and consent and return the document as indicated. AGAIN, I am not sure the above is the answer but it seems to fit the circunstance. What makes anyone think they matched your Medicare Tax payment in your retirement year and, "After careful consideration United has decided not to pursue the refund of overpayment of their half of the Medicare Tax?" - Quoted from UAL's formal rejection letter for refund of overpayment of Medicare Tax, > Bob Falco	FICA Medicare Refund Summary & Info Help Date: 10/10/200X Mr. UAL Pilot, After much research and careful consideration, United Airlines has decided not to pursue an IRS refund of FICA taxes paid on the Pilot Non-Qualified Plan lump sum payments. If you believe that you are entitled to a refund, you may contact your tax advisor or the IRS for details as to how you may file an individual claim. Mary Lou Gleason Benefits Analyst - Strategy & Design United Airlines 1-847-700-9909 You can leave her a message and request your UAL non-qual medicare tax denial letter.  She knows what it is.  State your file number,name, and mailing address and you should get denial. The denial letter is one of the steps that has to happen if you have/had non-qual tax money at stake and want to try to get it back. Call her to get a form letter from United outlining the inaction of United. ed  It will look like the letter on the right. FORM  843 INFO This 843 Form is a catch all form for many issues regarding tax abatements. The IRS really has no Form that is tailored to our situation. So, you do the best you can to make the situation fit the 843 Form and hope for the best. What I've done is the following: Line 1: I realize that the form says to prepare a separate Form 843 for each tax period. I did not do this. What I put in line 1 was my retirement date as "from", and 09/01/05 for the "to" date. 09/01/05 represents the last date that a monthly non-qualified payment was paid. Line 3a: check employment Line 3b: check other and specify 1040 Line 4 a & b: nothing entered As you can see the Form 843 is not specifically set up for our claim but that is the route you must go. I have the feeling that a lot will depend on the explanation section line 5. Backing this up with your proper calculations, supplying them with the letter from UAL which explains why the withholding of the Medicare Tax occurred, attaching your W-2 forms from Northern Trust for the UU3 (non-qualified payments made) over the time you collected non-qualified payments. Attaching the W-2 for the year you retired showing the ramped up Medicare Wages (box 5). Attaching the 2006 W-2 which shows the bankruptcy courts ordered settlement for your non-qualified claim (box 11). Finally attaching the rejection letter from UAL. Reference all of this in the explanation section and provide the best Sale Job you can muster up. I think it will all come down to the individual classifiers desk it lands on. Some will pick up the stamp saying Approved and others will pick up the stamp saying Rejected. If you get rejected than process the appeal and eventually you or your representative will have to explain it all over again, possibly in person. Having a complete knowledge of what actually went on with regards to this excess tax that was withheld will go a long, long way if you have to sell this to an appeals panel. I know there are some guys that have claimed to have received their claim. I processed mine shortly after the Supreme Court refused to hear our case. I have said many times that that was the time to go forward with your claim. Claims prior to that date in my opinion were premature. In any event, I have heard nothing from IRS as of yet. I suspect it could take 4 - 6 months before a determination is made. Good Luck with your Claim, Bob Falco FICA Items. Arvi, In my humble opinion the tax period for Form 843 paragraph 1 in requesting a refund of Medicare tax should be from date of retirement to 4-27-07. This is the transaction date of the last UAUA stock settlement and also the date the U.S. Supreme Court denied our review of the termination of the Pilot's Pension Plan. Denny Fendelander I am not sure what year you retired but if you know anybody that retired in 2003, as I did, please let them know that the IRS limit of three years to file an amended return is up this month. My tax man filed an amended return to recover the excess FICA that I paid on the pension that I didn't receive. Beyond the three year point my tax rep says will require an appeal to an IRS board of review stating how the individual was wronged. Anyway I am passing along the message I sent to RUPA to post on their web cite. The editor has chosen not to publish it so anyone you think might be helped by the method of my tax rep is welcome to use it or contact me. Hope all is well on your end. John Myer From: "Bob Goetz" <bgoetz@cox.net> Add to Subject: [retup] FICA Refund I just received notice from the IRS that the check is in the mail for all that I had filed for. I had sent my refund request in just at the end of last year so it took almost 4 1/2 months to get it. FYI. I had filed it using the help that Pete Sofman provided in message 8165 dated Nov 4, 2006. It appears that all his information was right on target as it worked for me.	p://detnews. com/article/ 20091029/ AUTO01/910290465 Senate committee calls Delphi's salaried pensions 'devastating' Oct 19, 2009 DAVID SHEPARDSON Detroit News Washington Bureau Washington -- A Senate committee criticized the disparate treatment of the pensions of Delphi Automotive LLP's hourly and salaried retirees and demanded more information on how the decisions were made by the Obama administration. Sen. Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, noted at a hearing Thursday that the Troy-based auto supplier had terminated its pension plans covering 70,000 workers -- the fourth-largest ever takeover in terms of people covered. In July, Delphi terminated its pension plans, saddling the Pension Benefit Guaranty Corp. with responsibility for the pension plans of Delphi workers and retirees. That move was initially estimated to cost the government's insurer of pensions about $6.25 billion. In a report from the Government Accountability Office released Thursday, PBGC increased its estimate of costs to $6.7 billion from the Delphi pension takeover. The government-owned corporation' s takeover of Delphi's plans is the second largest in history by amount of money PBGC will pay out behind the termination of United Airlines pensions. But under agreements with its former parent company General Motors Co., it is topping off the pensions of United Auto Workers retirees while the 15,000 salaried pension recipients stand to lose a chunk of their pensions. "General Motors did the right thing by many tens of thousands of workers under union contracts, and 'topped up' their pensions," Harkin said, meaning the hourly retirees will not lose any of their pensions. "But there some other union workers -- electrical workers, operating engineers and machinists -- who labored right along side their brothers and sisters, but are not being made whole on their pensions." In fact, GM agreed to "top up" most of the pensions of the smaller unions last month. He also noted that "there are 15,000 salaried (retirees) who also stand to lose some of their pension benefits." Harkin said he planned to raise the issue with GM directly. Separately, Delphi confirmed Thursday it had settled a long-running lawsuit with a group of investors by Appaloosa Management LP over its April 2008 decision to withdraw from an agreement to invest up to $2.55 billion in the company's reorganization. Sen. Sherrod Brown, D-Ohio, said many Delphi retirees are facing "drastic reductions." He noted that Delphi earlier this year cut off health insurance and life insurance to salaried retirees. "They simply are not being treated fairly," Brown said. Sen. Mike Enzi, R-Wyoming, the ranking member of the committee, said the Obama administration' s auto task force must answer questions about the deal that left salaried retirees with significant losses. "This type of deal negotiated behind closed doors out of the public view is exactly the type of deal-making that we have long criticized the PBGC for undertaking in years past," Enzi said. "Everyone needs to know and understand what promises were made, who negotiated this deal and how this administration also pre-packaged the GM bankruptcy arrangement. " Enzi said he was going to send a letter to Treasury Secretary Tim Geithner Thursday seeking all records relating to Delphi's pensions. That echoes requests from House Republicans. Harkin said the government must work to "ease the toll that pension failures take on working families." Under current estimates, retirees and workers will lose at least $800 million in what they were owed over the maximum that PBGC will pay. Some younger retirees could lose one-third or more of their pensions. The Delphi salaried retirees said the average retiree will lose $300,000 in pension payments over his or her lifetime. Rep. Tim Ryan, D-Ohio, said Delphi forced many younger salaried employees to retiree early, only to then terminate their pensions and cancel their health care benefits. His district in northeast Ohio has 5,000 Delphi retirees and the loss of income to his district is "devastating. " Delphi had previously announced it would cancel its salaried pension plan as it struggled to emerge from bankruptcy. Delphi ultimately exited with more than $2.5 billion in financial support from GM -- which was funded through government loans. Bruce Gump, a Delphi salaried retiree, told the committee that some retirees would lose up to 70 percent of their pensions. "This will result in many being at or even below the edge of poverty. No other group in the auto industry faces this threat," Gump said. He accused the PBGC of violating federal pension laws -- a claim PBGC denied. He noted that the PBGC agreed to waive its $3.4 billion in liens against Delphi's foreign assets in exchange for just $70 million. "They took this action knowing that they would have to assume billions of dollars in unfunded pension liabilities and drastically reduce the pensions of Delphi retirees." GM and Chrysler's salaried recipients also lost nothing in pensions, Gump noted. But even if PBGC had collected more, the payments to retirees from a seized pension are governed by limits in federal law PBGC has a $33.5 billion deficit. In May, the PBGC said it was closely monitoring companies in the auto manufacturing and auto supply industries. According to PBGC estimates, auto sector pensions are underfunded by about $77 billion, of which $42 billion would be guaranteed by PBGC. Excess FICA Refund Info Scroll on down for more. and/or click on these. FICA Refund July 17, 2009 Is there any news on the refund? Thanx, Chuck Mathis Moderator reply: No news is good news, IMO. The IRS attorney didn't like our challenge and she told us we had to provide the details of every Plaintiff's claim for refund, or she would make the Judge force us to do it. I replied that we are not asking for the Judgment on the claims, only the reasons for denial. She can't handle that as easily as she can claims for refund. We said "No, we will not allow the case to be turned away from the central issue, without objection". This is all preliminary, just between "representative of the Parties"; the back and forth is not part of the record unless one Party makes it official. Of course, it's all in writing. We called her threat and it is not to her advantage to have a fight before the Judge and Mediator over it, so she won't push it (I think), but at the same time, she doesn't have a lot of options. She has to decide, IMO, whether she wants to take possession of the IRS's abuse of the law and the taxpayers. The dishonesty is readily apparent to her, and it will be easily seen, if she allows this to go before the Judge. How fastidious about keeping her hands clean, as well as her career expectations are the questions, now. Normally, these cases are disposed of, on the merits of the legal wording in the claims, by a Motion to Dismiss. We aren't going to make it easy for the Judge to avoid looking at the law. I believe there is some heavy-duty back-room arguing occurring, hopefully, some kicking and screaming. Denis Update from Koop Koopmann : June 11, 2009 We need the widest circulation of our status and that of those that have yet to file. We set a self-imposed limit to our suit to the original 170 claimants of the Medicare/FICA Refund Committee lawsuit. We ceased taking members and checks in late April. This allowed us the opportunity to set a standard and avoid the continuing flux of new members and the attendant administrative logistics. We have been in Federal Claims Court since the 26th of May, 2009. We have a Case Number, a Judge and a Mediator (ADR) appointed. Having said that: we are just waiting and we are using the legal term: "to freeze the moment" to ease our way through the system and final determination. If we succeed: the 170 Plaintiffs will be awarded Principal, accrued Interest, Damages and Costs. We have additionally filed that ALL UAL pilot retirees affected be allowed and encouraged to file an IRS Form 843 and seek Principal and accrued Interest restoration. If you have filed and are in communication with the IRS, please continue and save all your paperwork. If you are a candidate for a refund, file your 843 and start the process. Instructions are on the RETUP website. Yes it is complicated, No we don't do the form 843 for you and yes accountants are available and eager for your business. If we are unsuccessful, then you can form another lawsuit and start the process all over again, avoiding the mistakes we may have made. Upon determination of our suit, the Committee will be disbanded and all unused funds will be returned. Hopefully, by the time this message has been published in the RUPA News, we will have a settlement and we will be able to provide specific directions for your settlement. In conclusion: Please do not send checks or information packets to the Medicare/FICA Refund Committee. They will be returned to you at your expense. If you are affected, file your Form 843 and wait for updates. Respectfully, Koop Koopmann Treasurer, Medicare/FICA Refund Committee wmskoopmann@ aol.com ============ ========= ========= == Moderator note: Koop is being optimistic in thinking we will have a settlement in a reasonable time. I guarantee they'll drag this out, but if you are "in the System" (filed for the refund), the Court may want to get as many as possible involved. However, I don't think it would be helpful to your cause to join the fight, unless there is a strong reason. Wait and don't call Koop; we'll learn a lot in this first encounter. The IRS will bluff and threaten to go to trial, but they will offer something, I'm confident. They will not be able to overcome all our arguments, IMO, and they can't afford to lose. We have been assigned a contract attorney (from outside the Court) and her job is to keep this from going to trial, if at all possible, by mediating the Claim. It is a voluntary thing, and some may want to take any offer the IRS makes, and she will make every effort to have us all agree to the same thing. If that happens, there won't be a Court ruling/precedent that will become Case Law. I think that might be a mistake, but we (the Committee) will not make the decision. All Plaintiffs will make the decision in their own interest. Denis Retirees Update 02.08.2009 We continue to interview law firms. The pace is relatively slow due to the energy required to have a "face to face' interview with these firms. We are still attempting to develop a satisfactory strategy for you to review. We need input from the West Coast. We need a contact person or group in the SFO area.If we develop the concept of one "test" case, we would like it in a labor-friendly state. We need input from anyone familiar with the Delta Airlines refund of FICA/Medicare withholding. Please no rumors or "I heard", just the facts. Respectfully, Koop Koopmann wmskoopmann@ yahoo.com Ken: Plz contact me at WmSKoopmann@ aol.com. The Gang of 5 has been working with the legal profession to craft a solution. We are getting closer to releasing out findings and requesting a vote on the RETUP site.Let's coordinate functions. Thx, Koop -----Original Message----- From: kenolsonvbc <kenolsonvbc@ comcast.net> To: retup@yahoogroups. com Sent: Tue, 10 Feb 2009 12:18 pm Subject: RE: [retup] A New Formal Protest to FICA Refund DENIAL I have been working with Ryan Holden who is on the staff of George Miller, one of the few elected officials trying to help United Pilots in various matters including the FICA refund mess. Here is his latest email to me" From: Holden, Ryan [mailto:Ryan. Holden@mail. house.gov] Sent: Monday, February 09, 2009 9:58 AM To: kfolson Subject: RE:=2 0FICA Refund problems Mr. Olson, Thanks for your email. As you know, I forwarded your information on to the appropriate staff on the Committee on Ways and Means last year. Any favorable resolution may take a long time. Therefore, I would not wait to hear from me before taking any alternative actions you deem appropriate. Please feel free to keep me up to date on any correspondence you have with IRS. Thanks, Ryan Holden I would propose that all pilots affected by this to start writing letter to every member of the Committee on Ways and Means as to our plight. Just Google House Committee on Ways and Means and you will have the list of members. Ken Olson *      *     *       *      *      * On Behalf Of Denis O'Malley Sent: Tuesday, February 10, 2009 1:04 AM Subject: [retup] A New Formal Protest to FICA Refund DENIAL I have uploaded a letter, I recommend, challenging the IRS denial of requests for refunds of the FICA/Medicare taxes, taken in advance, prior to UAL's BK. The past denials have been based on lack of timeliness and no basis or provision in the law to allow the refund. When you object to the original rejection, you should make the same points, and even if you do, you should use this letter for the Appeals process too, particularly the part explaining the Appeals Officer's duty to consider the case law. After the IRS denies, and you object, they send your case to Appeals, which is a separate office where supposedly neutral Officers review your request for refund in light of "the law and judicial decisions to arrive at the facts". We must tell them that there is powerful case law that says income is not taxable if a taxpayer does not “realize an increase in wealth and have complete control of the cash.” They say there is no basis, and we challenge by saying there is, and we give the case law citation. Though we have mentioned this case in other protests, this directly challenges the "no basis" denial by the Appeals Officer. Case law, or "decided law", is considered legally stronger that statute law. Their bosses don't tell them about this. Keep in mind that the Appeals Officers are supposed to be independent Officers, but we know from member meetings, which are an option during the appeal process, that they have been told not to approve our refunds. The first applicants were treated fairly, but the brass changed that. As a rule, they don't like this pressure, and they know they are charged with being fair, and making fair decisions. Most, of the ones I've heard of, have been sympathetic, and feel they are being used by the "brass" who made the decision for personal reasons, IMO. There is conflict within the IRS, and I believe all those 45 day delays are indicative of protests to their "puzzle palace". Don't waste your time going to face to face hearings; they can't approve, and you will have nothing in writing for your case. The case, Westpac Pacific Food v. Commissioner, 2006-2 USTC ¶50,369 (CA-9), was decided in 2006, so it is recent law. A tax court decision (Commissioner) was appealed to the 9th Circuit Court of Appeals (based in San Fran) and was over-turned by a 3 Judge Panel of Appellate judges. It will hold unless overturned by a higher court. The IRS asked the 11th Circuit Appeals Court (ATL) to review with a full panel of judges, but the Court refused to review. The only court that can reverse is now the Supreme Court, and they would laugh at the request, IMO. You can "Google it" if you want to see what it is all about, but in that case, Westpac actually got the money, but it was ruled not taxable because of strings attached to it. The link to the letter, which is in MS Word doc format, and is the top FICA file is here: http://tinyurl. com/ce54sl If you have any problem opening it, let me know. Denis/ Once again, if anyone would like to be on the list for updates on any efforts to recapture part of the pre-paid FICA tax (for the non-qual pension), please let us know. You can view the list at: http://tinyurl. com/6f6plq (this url takes you to: RETUP => Database => IRS Lawsuit Interest ) If interested, please send us your Name, Email address, Phone number, and full mailing address, and we'll add your info to the list. Thanks, Pete Sofman RETUP co-Moderator 203-322-0724 psofman@gmail. com ============ ========= 1. FICA REFUND LAWSUIT LIST: If you are interested in joining a lawsuit to gain your FICA refund, you can add your name to a RETUP list, created by Charles Tolleson for that purpose. This does not commit you to anything. It just means you're interested in learning more about any lawsuits being considered. Go to: http://tinyurl. com/6f6plq and Click on Add Record. Then insert your full name and email address. 2. THREADS: groups of messages containing same subject: For those of you who read the RETUP messages online at the RETUP website, you'll notice that Yahoo has started grouping messages with a common Subject. These groups are called "threads". The threads also show how many messages are contained in them. When you click on a thread, you can then click on any message in the thread. The first message in the thread is the oldest. Any questions? Pete Sofman psofman@gmail. com ============ ======= And more summaries below August 7th 2008 - CPA article, sent to Jim Brooks, essentially repeated the older CPA magazine articles that stated the IRS position, not attached to this, because it is nothing new. The only thing different was the date, and it appears the Chief Counsel (CC) is sending it to CPA magazines, again, as Bob Falco points out. Denis To All, Bottom line is that this is THEIR interpretation of THEIR regulation (3121 v 2). That does not mean it is not refutable or challengeable in a court. Just because the regulation does not address the special circumstance in which individuals may overpay their tax obligion when a plan is terminated prematurely DOES NOT AUTOMATICALLY GIVE THEM THE RIGHT TO KEEP SUCH OVERPAID TAXES PAID. There is NO regulation to my knowledge that allows them to keep such overpaid taxes and they have been very coy in their language with denial letters for appeal. They also are flooding the various newsletters with their claim of disallowance in order to intimidate (their best weapon) each and every individual who overpaid their Medicare Tax on a terminated deferred compensation plan to walk away meekly from continuing their claim. Their intent is to cut as many as they can out of the herd that do not want to be bothered any more with regards to this matter. IMO when and if this ever gets to a district court our chances are better than 50/50. The IRS does NOT like to lose cases of this nature and for those who continue to be a thorn in their sides they will very quietly settle the claims before going to court and there will be NO propaganda published in the various tax newsletters that they paid off on some of the claims. Again, all my opinion. I was one of the fortunate few who received my overpayment plus interest. They to date have NOT asked for it back NOR did they send me a 1099-INT form for the $1,024.00 they paid in interest on my claim. This tax situation has been the most mishandeled tax matter I have ever seen in the close to 40 years I have dealt with tax matters. Frankly it is comical and an absolute joke and I would love to see it in a district court in order to see what a district court judge would think of the complete mishandeling of this tax matter. Bob Falco Sunday, June 22, 2008 7:59 AM Subject: Re: [retup] FICA Appeal Let's start a list of $100 donors for the FICA appeal. Maybe send it to Bob Falco for future use and management. Best, Steve Church, LAXFO retired wmskoopmann@ aol.com wrote: Copy of the Denial of Appeal: Copy Linda Shanks IRS Appeal Office ID# 84-20364 1244 Speer Blvd, Suite 400 Tel: 720-956-4485 Denver, CO 80204 Amount of claim: $2416 June 3, 2008 Tax Period(s) Ended: 12/2001 William S & Lauretta Koopmann Dear Mr. & Mrs. Koopmann I have completed my review of your claim for abatement and/or refund of taxes that we have charged you. Based on the information submitted, there is no basis to allow any part of your claim You may pursue this matter further by filing suit in either the United States District Court or the United States Court of Federal Claims. If you decide to do this, you must file the suit within two-years from the date on the letter denying your claim, which the Cincinnati IRS Campus mailed to you on March 7, 2008. However, if you signed a waiver of the notice of disallowance (Form 2297), the two-year period began on the date you filed that waiver. Please note: Your two-year period has NOT been shortened or extended by our consideration of your claim. If you have any questions, please call me at the above phone number Sincerely: Signed Linda Shanks, Appeals Officer 3/20/08 Hello Arvid, This is Phil Garcia writing (10/28/69 to 2/1/03). I went two years early for all the same reasons as the rest of us. I had a long discussion with the Tax Advocates Office in Seattle this morning. She had sent a note acknowledging my request to become involved in the FICA Refund process. She clarified a few items that put the issue in total Catch 22. As some of us have already heard, the Tax Counsel for the IRS is denying the refund NOT based on the time line required to file the refund request BUT on the following IRS Code: Section 3121 (v) (2). She stated that their counsel is of the opinion that A) UAL was required by law to withhold and collect the excess FICA and B) a non-qualified plan is not classified as a 'secure plan' and therefore not subject to the protections of a higher class retirement plan. The Cincinnati Office is an IRS Business Office. They sent out refunds with the intention of collecting the excess FICA from a business: UAL. Well, of course, they were stunned to realize that the present UAL was not the same UAL that collected the excess FICA. Therefore, sums were being refunded from the general IRS treasury with the intention of being replaced by the funds from UAL's treasury. Hello? Thus, the Cincinnati office is now trying to get the toothpaste back into the tube. Backed by the lead counsel at IRS headquarters. This begs the question: was UAL required to forward the excess FICA sum to the IRS or were they allowed to hold it in their general accounts to be tapped later. It appears that the latter is the case if the IRS can't justify sending us the refunds. The Tax Advocate told me that there are only 3 people in her office and to her knowledge, none of the three has made a judgment nor approved a refund to a Washington resident. One of the other retired pilot sites is passing that story around. Her suggestion, once we have received this new denial letter from the central office (Fresno for us) is to seek our own counsel as a class. As individuals we will have a tough time. Mary Lou Gleason's form letter explaining that UAL chooses to not get involved is an understatement. UAL was still distributing stock settlements from a non-qualified area in 2006, am I correct? How is it then that they can wash their hands of a non-qualified amount they collected and now claim they don't have BUT distribute stock as a settlement pertaining to some area of that same non-qualified class? If anyone on the West Coast under the Fresno umbrella is researching a tax lawyer, can you please let me know. I think some numbers are going to be required to spread the cost of appealing to the end. Thanks, Phil anjinsan1@gmail.com Wednesday June 18th NYC RUPA Luncheon Bob Falco generously contributed a 10 minute description of the FICA/Medicare dilemma for the collected retiree?s. The Luncheon was attended by retirees from the ages of 62 to 86, needless to say, not everyone was affected. An information period of Questions and Answers was provided by Bob at the end of the Luncheon. 8 retirees attended to seek additional information. The dollar amounts varied from $900 to $12K. Bob Falco has become the focal point for leadership in the NYC area. Bob has an Tax Accounting business and has been dealing with the  IRS for 40 years. He has the expertise to be an expert witness and has a  client base of several pilots who have been denied claims. The problem we see is that NYC area only has about estimated 8 to 16 pilots who would be willing to goforward on this project. This project will have to have a national base of at least 200+ retiree?s. The IRS is aware of this dilemma of individuals trying to do this deal solo. ? The initial thoughts on the subject are: ? We would need to collect an estimated $100 per client. Seek a Tax Attorney with an initial  offer of $20K or greater as a retainer and the potential of 25% ( negotiated ) of any and all fees collected from this suit. My case I have a $2400 claim plus interest, my costs would be $100 up front and a settlement of $2400 - $600 of fees, net $1600 and a great satisfaction of completion. The larger domiciles such as SFO and ORD can provide the much needed volume of participants and organizational skills required. We in NYC just don?t have the numbers to go it alone. The URPBPA has remained silent on this issue and I don't anticipate any support? NYC has offered assistance. We need input and the assistance of the larger domicile areas. This subject could become more intense as the final PBGS numbers are adjusted and released in October 2008 and it is possible that we could receive additional penalties for early retirement, Let the dialogue continue as we attempt to organize. Thanks, Koop For those that are still early stages of the Appeal process, best of luck and keep us informed if you achieve any degree of satisfaction. Subject: [retup] Re: FICA Claim aimhigher4000 wrote: UAUA could be sued for damages for paying the tax from our pension funds when it knew that termination was just around the corner (not permitted by reg's). Our MONEY, however, is in the hands of the IRS. The IRS is the entity that should refund our money. Eric I think the this appeal has reached the top of the IRS and elsewhere, and someone has made the decision that this will have to be forced into the Federal Courts. The money probably was turned over to Medicare, when collected, and it probably doesn't want to give it back, because Medicare is a black hole. IRS probably doesn't feel they should reduce their collections batting average, over this, and it is not a matter of them being unfair to us, although they know this is bad for their already dismal image. I'm sure there are differences of opinion among the different IRS District Offices too. Like Bob Falco said, this is not normal for the IRS, so I think it's gotta be politics and internal Agency conflicts, IMO. I'm sure they are not prepared to defend denying our appeals, so don't get too discouraged. We said that it was going to be drawn-out as long as possible, in the hope that many would give up their claims. The Administrative Procedures Act requires that, when dealing with all "Agencies" of Government, we must "exhaust all administrative remedies" before we can exercise our constitutional right to redress grievances in Federal Court. Like I said, a long time ago, this will probably come back to burn the Government, as I expect one suit will be allowed to represent all similar cases and individuals, and the Court will be asked to decide that everyone who paid the tax should be refunded with interest, even those who believed, as they were told, that the time limit was passed to request refunds. Let them dig their hole. Denis When I sent my appeal letter and information to the IRS I also sent a package to my representatives. I received a phone call from my Congressman' s legislative Aide this last week. She was very interested in the subject, had a good understanding of the Taxpayer Advocate system in the IRS, and really seemed to want to help. I called Pete Sofman for access to Bob Falco and Denis O'Malley, which he provided. Denis has responded to me with some very sage advice. I have collected the items he suggested and have sent them in an email to the Aide. We'll see what happens next. I'll do a posting when I know more. John Rains ERIC_1940" <cemalm@msn.com> Yahoo! DomainKeys has confirmed that this message was sent by yahoogroups.com. Learn more Date: Sat, 26 Apr 2008 01:35:17 -0000 Subject: [retup] Re: FICA Claim I filed my appeal (as requested in the denial letter) to the Cincinnati office a couple of weeks ago. I also sent copies to my congressional representatives. The next day I received a letter from the Seattle advocates office stating that he still had my file and if I intended to request an appeal I should send a request in writing to his office by the end of April or he would close the file. Repeated calls to his office got no response so I sent him copies of the request. Obviously one hand does not know what the other is doing. I am hoping for refunds from both offices. Eric >>>>>>>>>>>> >>>>>>>>> >>>>>>>>> >>>>> An Interesting message from Captain Pete Friedman about the FICA refund. March 27, 2008 I received a very interesting call today from an IRS customer Service agent in Colorado. He was responding to a call I made to the IRS on March 12th, 2008. He called to apologize from the FICA situation. He said that there is nothing the IRS can do without an act of Congress to change the law regarding our FICA claims. The ruling has come down from the legal department of the IRS that there is no provision under the present law to refund FICA when a non-qualified plan terminates. He also said that there is no impetuous for Congress act on this situation, so probably nothing will happen. I asked about the appeal process and why some people are receiving refund. He said that the appeal board should rule under the same law. I didn't argue the point. He was sorry about the situation, but there is nothing the IRS can do without a change in the law. I was courteous, but let him know all of our displeasure with his organization. He stood very firmly behind the conviction of the IRS.   >>>>>>>>>>>> >>>>>>>>> >>>>>>>>> >>>>> March 27, 2007 - Most current letter denying a refund request. Click on this link for more answers!  FICA Refund August 21, 2007 FICA NEWS  All:  I have just received a 4-figure check for the overpayment of Medicare Tax on our imputed lifetime benefits from the terminated Supplemental Plan. ($695 of which is reportable interest paid by some entity to me.) I followed the advise on the RUPA website from Dan Seiple (Thanks Dan, if you are ever in Washington, D.C., I want to buy you dinner) and filed the Form 843 along with all suggested documentation to the IRS in December 2006. I kept getting letters every 30 days for about three months stating that "The case was being worked." After about 90 days, I called the toll-free number and asked specifically about the case. I was told that since the IRS had not sent me any explanation for that period of time, I was eligible for a free Taxpayer Advocate, who I was put in contact with. She has worked my case for about three months and has been great in keeping me updated. She ended up going through the Cincinnatti region of the IRS and that is where it was resolved in my favor. My advocate told me that she had been told by the IRS that there were "many" pilots in the same situation. I suggest any of you who have not received an adequate answer from the IRS (after filing the package), call them and ask for a Taxpayer Advocate. When one is assigned to you, give them the information about the Cincinnatti region being the region to forward the package. Someone there is on our side on the issue. Regards, John Adams, UALRet
United Taking a Flier With Pensions United's Faustian Bargain      Part II Pension Discussions By Rich Duprey November 2, 2007 The Motley Fool http://tinyurl. com/3383wo Literature's Dr. Faustus is a scholar who has learned all there is to know and makes a pact with Mephistopheles, the devil, trading his soul for power and material gains. He's likened to Icarus, who flies so close to the sun his manmade wings melt, and he falls fatally to Earth. That seems like an apt metaphor for the deal United Airlines' parent UAL made with the government's Pension Benefit Guaranty Corp. (PBGC) in defaulting on its employee pensions. Apparently, I was too exuberant in suggesting the government give back to United the pension obligation it foisted on the PBGC. As part of its agreement with the airline, the PBGC imposed an extraordinary waiver of its powers and agreed not to seek to restore it to United --ever. It's a curious move by the pension agency. While only once before has it returned a pension plan to a company that defaulted on its pension obligations, I'm sure today's situation might be the only time a company has been sitting on a host of valuable assets it now wants to spin off and reap billions of dollars in profits from. An embarrassment of riches UAL has been floating the idea of selling its Mileage Plus loyalty program, which one Bear Stearns (NYSE: BSC) analyst has suggested could be worth $7 billion if spun off. It also wants to shed its profitable United Services division -- the maintenance, repair, and overhaul business estimated to be worth as much as $600 million. In total, United might be able to fetch some $16 billion from the noncore pieces it puts up for sale. Considering the PBGC assumed more than $6 billion worth of pension obligations from United, it would be reasonable to ask why the airline shouldn't be responsible for the obligations it shed. Employees were the ones who lost their souls after having worked for decades for the airline to see their benefits slashed. Pilots, for example, who are required by law to retire at age 60, found out that not only would their benefits be cut nearly in half because the maximum the PBGC pays is about $47,000 for someone who retires at 65-- they were penalized again because the PBGC discounts benefits further for those who retire before 65! Talk about being caught between the flames and the fire! Contrast that with the sweet deal chairman, president, and CEO Glenn Tilton carved out for himself. A deal worthy of Mephistopheles If not for its extraordinary waiver guarantee, the PBGC might have returned the pension obligations to United as it did with LTV in 1990, and restored to United's employees the benefits they had worked and negotiated for, and had been expecting. What's not clear is why the PBGC agreed to such a waiver. Was it the money? The PBGC was given a $1.5 billion stake in United when the airline reminted its previously worthless shares, equivalent to 23.4% of all outstanding shares and making it the largest shareholder at the time. The pension agency received 11.1 million shares of common stock and 5 million shares of convertible preferred shares. It's not atypical for the PBGC to get shares in a company whose pensions it takes on, as it allows the federal corporation to recoup some of its costs. A higher calling In Goethe's Faustus, divine intervention at the last moment prevents Mephistopheles from seizing the alchemist's soul. Unless it's found that there was some skullduggery involved in the negotiations between United and the PBGC, it seems it will take divine intervention to make United responsible for its pension obligations. ============ =========	FICA Items. In response to the latest URBPA missive concerning claiming the excess fica taxes paid-it ain't all that hard! I just received a nice check from the IRS after following the guidelines laid out by the CPA for RAA (which you can find about half way down on the comments, opinions page of the RUPA web site). Granted it took me half a day to find all the stuff, but it was worth a 4 digit check with interest and I didn't need no stinking tax advisor! Make sure you enclose all the W-2's for the years in which you got non-qualified benefits and copies of all the letters he calls for. I made this statement in section 5 of the IRS form which apparently worked; 5 Explanation and additional claims I retired from United Air Lines in March 1999. UAL declared  bankruptcy  Dec. 30, 2004. As a result, I lost the benefits from the supplemental non-qualified pension plan. At the time of my retirement the value of the supplemental plan was $235,284.86; the FICA tax I paid on that sum was $3411.63 (see UAL letter- exhibit 1& W-2 for 1999- exhibit 2). I am owed a refund for the excess monies I paid, as I will not receive the full value of the supplemental pension plan. United quit paying the supplemental non-qualified plan as of Oct 1, 2005. Up to that time I had received $122,074.68 from the supplemental plan (see enclosed copies of W-2’s - exhibits 3,4 & 5). The FICA tax owed on $122,074.68 would be $122,074.68 x 1.45% = $1770.08 (again, see UAL letter-exhibit 1). Therefore, I am in excess of payment by the original amount paid, $3411.63, minus $1770.08, the difference being $1641.55. I have never claimed the excess FICA tax as a credit on my tax returns. I have requested United to pursue a refund for the excess taxes paid, but they have denied that request (see UAL letter-exhibit 6). I am aware of the three-year time limit on filing claims for refund for the year in which the tax was paid; however, in this case there was no way for me to be aware of the need to file within that time limit, since United had not yet filed for bankruptcy. Therefore, I am filing a claim based on when the plan was terminated rather than when the tax return was filed. Happy Hunting, Bob Johnson United Taking a Flier With Pensions             By Rich Duprey October 4, 2007 12 Recommendations Back in 2005, United Airlines -- later reincarnated as UAL (Nasdaq: UAUA) -- terminated its employee pension plans, creating the single largest corporate pension default in U.S. history. The belief was that it simply had more liabilities than assets and was under bankruptcy protection already. If it was going to emerge from bankruptcy (which it did in February of 2006), it would need to reduce costs further. Putting the federal taxpayer on the hook for the $6.6 billion in pension plan costs through the federal Pension Benefit Guaranty Corporation, or PBGC, was an easy out. It seems, though, that the unions, shareholders, creditors, government -- and, most importantly, the retirees -- got hoodwinked. United had an asset on its books that could have paid for the entire cost of the pension obligations -- and then some -- but according to the financial statements at the time, it was a negative asset, a cost. Only now that United is considering profiting handsomely from those assets, maybe someone should go back and take a look at what was going on -- and make the airline responsible once again for its retirees' benefits. Getting mileage from miles programs Like a number of airlines these days, United is looking to spin off its customer loyalty program to raise money, because these programs are about the only thing making money for the major carriers. Although it's not a stand-alone company reporting results, the Mileage Plus program is estimated to have generated $600 million last year for United, and a Bear Stearns (NYSE: BSC) analyst figures it could be worth more than $7 billion if it's spun off. American Airlines parent AMR (NYSE: AMR) may also spin off its AAdvantage program, as one large investor wants, as a way to better value the two businesses. AAdvantage is the industry's largest loyalty program, followed by Mileage Plus. The airlines sell the mileages to merchants, who in turn use them as rewards for their customers. American Express (NYSE: AXP), Citigroup (NYSE: C), MasterCard (NYSE: MA), and Visa all use mileage programs as inducements for consumers to use their cards. They're so profitable because the airlines sell the miles for pennies, getting revenue up-front, and then the fliers later redeem the points at prices higher than what they probably would have paid for the tickets. It can also take years before they're redeemed, if at all. Ever since Air Canada spun off its Aeroplan loyalty program, the programs have become a hot commodity for the airlines, and a potential quick fix of cash. No accounting for United's plan Yet one has to wonder why United didn't consider the loyalty program back in 2005 when it was putting the onus for paying its retirees onto the government. Look through its annual report for 2004, and you won't find the loyalty program listed as a richly valued asset. In fact, it's not mentioned anywhere at all under assets. United does say it recorded an $840 million liability to account for miles being redeemed in the future, so you'd think that the Mileage Plus program was costing United money. You would, of course, be wrong. In 2005, when Air Canada sold off a 12.5% stake in its Aeroplan loyalty plan for a price that valued the entire frequent flier program at about $2 billion Canadian, United's management must have had a pretty good idea that it, too, was sitting on valuable asset. Putting the toothpaste back into the tube Now United wants to profit from this richly valued asset. I have a better idea: Let's give the pensions back to the airlines, rather than letting them benefit at taxpayers' expense. Executives were granted millions of dollars in stock awards upon the company's emergence from bankruptcy. CEO Glenn Tilton alone received more than half a million shares valued at more than $20 million -- and selling the loyalty program would certainly enhance the stock's value for him and other top executives. Can the PBGC give the pensions back? Sure it can! Under Section 4047 of the Employee Retirement Income Security Act of 1974 (ERISA), the PBGC can order a company to restore its pension obligations when the company's financial health has improved. In fact, it did that with steelmaker LTV back in 1990. It's hard for me to believe that in the year and a half that United has been out of bankruptcy, its loyalty program has skyrocketed in value so much. Instead, this has been a dormant asset that's only now being brought to light, because of the value it can return to current shareholders. Of course, pre-bankruptcy shareholders will realize nothing. Yet if the PBGC is to ensure that current shareholders don't unduly profit at taxpayers' expense, it'll have to move quickly, before the loyalty program is spun off. If the PBGC blithely allows a spinoff to go forward, I'd consider it in default on its obligations -- a situation at least as bad as United's own role in this.	WHAT A NICE SURPRISE!   But read letter from Bob Falco on for an explanation! "Today, in the mail I received" TWO very large packets of same Corporate stuff, probably because I have a small fractional share somewhere and the original shares they sent that I am waiting to sell at $50. Ya neva know. Also, yesterday, left unopened 'til today, in a regular white envelope with a "window" that showed my name and address, company address, state, and organization (just like the old paychecks), and sure enough, it was a nice 4 digit check from Payroll. Gave me goosebumps all over.   Thanks to those of you who "rattled their cage", it was a refund of "FICA taxes withheld from my checks during the period between 1997 and 2001". It included almost 1/3rd interest from the IRS. Watch out for it, and have a nice day. Denis 4/2/2007 To All: Today I received a check from United. on the old United Paycheck stock with stub giving an explanation of what the amounts represent. It was a check of 4 figures. About 1/3 of the check was for interest and 2//3 was for FICA Refund. The note at the bottom of the stub, verbatim, states: "This statement explains the refunded FICA taxes that were withheld from your checks during the period between 1997 and 2001. The tax adjustment represents your share of interest received from the IRS." Since I was on extended disability during those years (hearing/heart problems), my check appears to confirm what Bob describes below. There was no cover letter of any sort. I'm assuming that my W-2, already corrected once, may have to be corrected again. Are we having fun yet? I don't recall (short memory ?) l that I ever signed a "certification and consent" statement mentioned in Bob Falco's email. Thanks, Bob, for all your inputs to RETUP over the last several months. Your explanations are a great help to all of us. Ron Weber           * * * * * * * Re: [retup] FICA/Medicare FOLDERTuesday, June 24, 2008 6:04 PM From: "Denis O'Malley" <dj.omalley@cox.net>Add sender to Contacts To: retup@yahoogroups.com Excellent information because it answers some questions and it looks to have been cleansed of the S.S. number, which we don't want circulating. I forwarded some .pdf files of Appeals letters from the IRS to a couple of you, before realizing that the Social Security number of the claimant was on them. If you receive it, don't forward it with the number because of possible identify theft problems that may or may not be true problems. I apologize for not thinking about it, first. We see from the below that the critical issue has not changed. The claim is denied because "Based on the information submitted there is no basis to allow any part of your claim." In other words, there still (as of 6/3/08) is no law they can find that requires them to return the money AND that is based on the information submitted, which could mean something. You have to believe it is there for a very good reason. The "no basis (law)" thing won't fly in a Court of law, but it occurred to me that if you didn't file a formal "Protest letter", that may be what they are finally going to rely on to defend their decision. I remember from days long past, that the formal Protest was critical, and I couldn't remember why, exactly, but it seems to me that if you were to go to Court, you could only rely on written evidence you had, and if the Appeal was in a verbal exchange, the Appeals Officer would have to be subpoenaed as a witness who would be relying on his memory, and the Court might try to discourage you from filing the case, on that basis. The IRS intentionally tricks you out of a right to Protest by telling you that you MAY choose a Small Dollar case appeal for a disallowed claim that is under $25,000... You think, automatically, that applies to me, therefore... , but I think that if you are thinking of going to Federal Court, you are risking losing a valuable right by choosing that route. Filing a formal Protest is simple and it can't hurt you, in any way. Do it, if you haven't already done so, and if you did choose the "informal route they wanted", you can still file the formal Protest, I'm sure, provided you have not had a final hearing and a final denial letter, like the one below. Not saying that Koop is S.O.L., but I just saw his letter and it rung a bell from way back in the last Century. The Formal Protest requires a formal answer (hard evidence). In it, you argue why you think the initial denial is wrong, and you should address everything in it. That is the heart of the Court case. I know that, in the past, the favorite ace in the hole of the IRS was to claim the appellant failed to Protest and waived any rights he had on that basis. I'm not sure what the small Dollar case involves, but if there is no formal arguments and answers, it's probably NVG. (Maybe not NFG) For our purposes, and based on a recent Final Denial letter I saw, you should state that the reference given in the Code for denying the refund is not valid for denial, and only justifies the withholding, initially. It also involves and implies, that the taxes don't have to be withheld if there is "substantial risk of forfeiture of the rights to such amount". That means a taxpayer shouldn't be taxed on income that is in danger of default, so it follows that if the money was withheld and the income never received, the Code does not require that the taxpayer suffer the tax. Any jury would follow that, and it needs to be WRITTEN in the "protest". This is the essence of the claim for refund, and I would love to see how they will respond. The "protest letter" and response will be the most valuable pieces of evidence you have in Court. I would also protest that they gave you no valid justification for keeping your money, and that if they don't tell you exactly what they are relying on to keep it, you cannot appeal it, and are thus being denied that right to appeal. Let the Courts decide, make the argument in writing. You PROTEST that, clearly and loudly, and will take it to Court! What they quoted was justification for taking the money, not keeping it (rejecting your claim). Also, I noticed that they mentioned the three year time limit and didn't seem to emphasize that it disqualified you. That might be the "sleeper" they will ultimately rely on, because that is the only real thing that they have, and it is no good, IMO. Since it is a part of the denial, I also think that you must challenge that time limit. Failure to protest it, assumes you agree. I would rely on that part about "substantial risk". United took your money for taxes, ignoring that risk provision, probably because if they didn't, it would be tacit admission that they were planning BK, and their credit would be worthless. Paying cash for Jet-A gets messy. The IRS can't be held liable for United's error, so don't protest that withholding; it will only cloud the real issue. One more thing of little consequence, I believe, is whether, as Bob Falco states, this is actually Medicare tax. All the IRS letters refer to FICA and so did the United correspondence, so I don't think there is any advantage to arguing, or even mentioning, the Medicare tax. Denis

Here is a comprehensive letter from Bob Falco.

We hope it clears up our confusion,

THANK YOU, BOB FALCO   ed.

Ok, Guys, First of all it is very difficult for me to understand that the majority of our group does not even have a clue as to how they were raped by UAL. That being said I will continue on to try to make you understand this FICA thing. This is going to be lengthy as you MUST understand what exactly went on before you should even try to make a claim for any overpayment of Medicare Tax..

Yes, Medicare Tax!!! This has nothing to do with FICA. The two terms are being used in conjunction with one another but they are different. FICA involves Social Security and Medicare Tax involves Hospital Insurance (HI) when one reaches the age of 65.

This all goes back to the ERISA laws which defined "High Compensated Employees". Our legislators created the ERISA laws which defined high compensated employees. Airline pilots exceeded those income levels. Because our annual earnings exceeded those levels our pensions were subdivided into Qualified and Non-Qualified plans. The Qualified Plan or Defined Benefit Plan was the amount that we earned up to but NOT exceeding the ERISA limits. For those amounts we were supposed to received a pension based on years of service, final average earnings etc. That plan was also supposedly backed by the PBGC - HA! I can write an entire diatribe on the shortcomings of the PBGC. That will wait for a later date.

The pension credits that we earned which EXCEEDED the ERISA limits were designated as NON-QUALIFIED benefits. This was a separate negotiated plan with UAL. Other employee groups did not have a plan of this nature as their annual incomes NEVER exceeded the ERISA limits. The Non-Qualified plan or Pilots Supplemental Plan was set up as a DEFERRED COMPENSATION plan with UAL. After we retired we usually received 2 monthly checks. One from the defined benefit plan and one from the non-qualified plan. If you paid close attention to the annual reporting of these plans to the IRS the defined benefit plan was reported to you and to IRS on a form 1099R. The non-qualified plan was reported to us and to IRS on a W-2 form. The non-qualified plan was always considered a deferred compensation plan. The IRS's code for deferred compensation plans differs dramatically from a retirement or defined benefit plan.

The deferred compensation plan (NON-QUALIFIED), according to IRS regulations is not exempt from MEDICARE TAXATION. Now let's go to the year in which you retired. If you look carefully at your W-2 form for the year you retired you will see your total wages in box 1 of your W-2. In box 2 you will have the federal income tax withheld on those wages. In box 3 you will have your SS or FICA wages. In box 4 you will have the SS or FICA tax withheld on the SS wages. Now in each and every year the maximum SS wages changed because of indexing in the tax code. Most pilots always maxed out on their SS or FICA. However, that was not the case with the MEDICARE TAX. Regardless of what your annual income was, you may have maxed out on the FICA tax, but you NEVER maxed out on the MEDICARE TAX. The Medicare Tax was computed as 1.45% of your annual income with NO cieling or limit.

Now let's go back to the year in which you retired. You earned wages

(box 1) for which you paid income tax on, social security tax on and medicare tax on. IN ADDITION because of the IRS regulations governing deferred compensation plans UAL had to make a calculation of what your TOTAL benefits would be from the non-qualified plan for your lifetime. This was called the total imputed benefits you would be paid if you lived until whatever the actuarial table said you would live to. They took that age, then calculated the number of months until you would reach that age. They then multiplied your monthly benefit from the non-qualified plan by the number of months you were supposed to live based on the actuarial table. They then added that number to your earnings in box 1 of your W-2 and arrived at box 5 or MEDICARE WAGES. They then simply multiplied that sum by

1.45% to arrive at your box 6 or MEDICARE TAX . For those of us who collected non-qualified payments before the plan was terminated you will notice that such amounts were always designated as NON-Qualified (W-2 box 11). In as much there was NEVER any additional withholdings for FICA or MEDICARE TAX. FICA was never charged because it was incom considered to be wages from a deferred compensation plan but not EARNED WAGES. Medicare Tax was never withheld because it was withheld for your lifetime in your retirement year. This is the basis for your claim of Medicare Tax Overpayment for which you should be due a refund.

Since the bankruptcy court terminated the non-qualified plan you paid Medicare Tax on what your total lifetime benefits were supposed to be. Since you are no longer receiving those benefits you have overpaid your Medicare Tax. Your claim for refund of overpaiment should be islolated to ONLY this overpayment of Medicare Tax.

It has always been my position that before we could claim this overpayment of Medicare Tax, all legal efforts to restore our pension benefits including the non-qualified plan must have been exhausted. That square was filled legally when the Supreme Court refused to hear our case. For those of us who claimed their overpayment of Medicare Tax before that event their claims, in my opinion, were premature and could be denied by the IRS for just that simple reason. For those who have recovered their overpayment of Medicare Tax, I applaud you for your initiatived. However, you were flat ass lucky and slipped through the net before the IRS knew what was actually going on. I would not spend all of the overpayment you recaptured immediately as when the IRS finally figures out what has gone on they just may ask for the money you recaptured back at a future date.

Now lets get to the claim for the refund of the excess Medicare Tax paid. In your retirement year UAL sent you a letter stating the exact amount or your lifetime imputed benefits along with the Medicare Tax that was to be paid on such benefits. Because of the importance of this letter, I have seen some which were printed on RED or ORANGE stationary. My particular letter was on plain ordinary white stationary but it explained exactly what was going on, what the total of my lifetime imputed benefits were and what the Medicare Tax was based on those imputed lifetime benefits. Depending on when you retired, whether or not you elected the single life annuity or the PLSA or whatever there were different methods that the Medicare Tax was collected. In my case, I elected the PLSA. The Medicare Tax was then deducted up front from the portion of my PLSA that was designated from the non-qualified plan.

In order to calculate your claim properly from the IRS you first have to establish what the total of your imputed lifetime benefits from the non-qualified should have been. If you have the letter I described above you are off to the right start and you should use the figure provided by UAL for which you paid the Medicare Tax on. Most of the group claim they never got a letter. Trust me, you got the letter but filed it accordingly and now you are letterless. The second method of arriving at your total lifetime imputed benefits is to subtract your wage earnings in your retirement year ( box 1 form W-2) from the total Medicare Wages ( box 5 form W-2). This number may not be exactly the number UAL came up with in the letter but it is close enough. Then you must subtract the sum of all of the non- qualified benefits you received starting in your retirement year including the amount from your PLSA if you went that route through 09/01/05. The totals for the non-qualified payments can be found in box 11 of the W-2 forms you received from Northern Trust for each and every year you collected from the non-qualified before its termination. September 2005 was the last payment from the non-qualified. Then finally you must subtract the bankruptcy court settlement for the non-qualified termination. When you are done with all of the subtractions of the non-qualified benefits paid to you from the total imputed lifetime benefits, you then multiply that number by 1.45% and that is the amount of your claim. That sum should be put in box 2 of IRS Form 843. I would follow the advice of the Retirement Advisors as to how to word the explanation of your claim on form 843 and then provide a detailed calculation of the amount you are requesting the refund for overpayment of Medicare Tax. You must also request and get the denial letter from UAL for such claim and include that denial letter with the filing of y! our 843 form. Now if you are done filling out form 843, are satisfied with your explanation and calculations, you sent it off to the IRS. I'd send it return mail registered receipt requested to the same place you file your annual tax filings. In this way you get confirmation that the IRS received it.

I have obtained information which has stated that in a private ruling the IRS has denied such a claim. In all probability it is a denial for one of our guys who jumped the gun and filed prematurely. This is a private ruling and in no way means that it has become law. I am of the opinion that, most if not all, initial claims will be denied and one should be prepared to take it to the appeal level. The most likely reason for the denial will be that you are beyond the 3 year statue for making such claim. Your counter to IRS's position on the 3 year statue at the appeal is that the plan termination date was established by the bankruptcy court to be 12/30/04 and the 3 year window for making such claim will close on 12/30/07 and you are well within the 3 year window for making such claim. Beyond the appeal level is the tax court and one must weigh what is to be gained as to what the costs of going to tax court will be on an individual basis. Simply stated I think the IRS might adopt a strategy of stringing us out rather than paying us what should be our rightful claim for excess Medicare Tax. I have always maintained that we would be better off processing a group claim and have been in contact with URPBPA on this matter. Unfortunately, they have decided not to get involved with this claim and I fully understand why as each and every case is different. We are therefore put in a go it alone situation if we attempt to get this refund. Sooner or later the IRS will figure out what actually has gone on here and adopt a protocall for future claims.

So to summarize: Collect all your W-2's from when you retired thru

2006. Establish what your total lifetime benefits should have been by either using the letter from UAL or your retirement year W-2. Add all of the payments you received from the non-qualified plan after you retired including the non-qual amount from your PLSA if you elected that option. Do not forget to include the bankruptcy court ordered payout for the termination of the non-qualified plan. Subtract the sum of all non-qualified payments from the total benefits you were to receive if the plan was not terminated. Then multiply that number by 1.45% and that is your claim for the overpayment of Medicare Tax. Try to make your explanation, line 5 of Form 843, brief and to the point. Make copies of all W-2's and reference them with the calculation of your claim. Attach the copies of all W-2's to your paperwork. Finally attach the rejection letter from UAL. Sign the 843 form and send it off. Hope for the best but in all probability you just stepped in the ring for a 15 round fight. Decide beforehand just how far you want to continue to fight, and whether or not you want to use a CPA or Tax Professional as a corner man in what will probably develop into a dispute with the IRS.

I processed my claim approximately two weeks after the Supreme Court refused to hear our case and URPBPA decided to not get involved. I collected non-qualified benefits for exactly 1 year after my retirement. My claim worked out to be just shy of $8,000. They can take their private denial ruling and stick it as I will take it to tax court if necessary and will be representing myself.

For all: here are the links to the irs instructions for form 843 and 843 itself:
http://www.irs.gov/instructions/i843/ch01.html
http://www.irs.gov/instructions/i843/ch02.html
http://www.irs.gov/pub/irs-pdf/f843.pdf

Good luck with your claim, Bob Falco

---

Sens Urge Action On US Airways' Pension Liabilities

DOW JONES NEWSWIRES

January 30, 2007 6:26 p.m.

By Corey Boles
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--Senators of both parties have urged a federal
agency responsible for failed company pension plans to take action to
force US Airways Group Inc. (LCC) to abandon its hostile bid for rival
Delta Air Lines Inc. (DALRQ) and instead reinstate its company pension
plan.

Several senators Tuesday sent a letter to the head of the Pension
Benefit Guaranty Corp., asking the agency to force the air carrier to
use the money in its takeover war chest to fund the pensions of its
staff rather than attempt to buy Delta.

"If US Airways now clearly has the ability to generate considerable
cash and has easy access to credit markets, the company's ability to
restore its terminated pension plans must be fully explored," said the
letter.

The missive was signed by Sens. Maria Cantwell, D-Wash.; Saxby
Chambliss, R-Ga.; Frank R. Lautenberg, D-N.J.; Johnny Isakson, R-Ga.;
and Patty Murray, D-Wash.

US Airways has twice bid for Delta, which is in bankruptcy protection.
The first attempt was rebuffed and the second, worth around $10.2
billion, is awaiting a response. As Delta is in bankruptcy protection,
it would be its creditors rather than its board who will determine its
future.

Lautenberg argues that $5 billion of the funding is in cash, more than
the roughly $4.8 billion in liabilities the company owed when it
handed off administration of its pension funds to the Pension Benefit
Guaranty Corp.

The PBGC effectively acts as a lifeboat to rescue the pension rights
of certain types of pension plans at failed companies. It collects
contributions from more than 30,000 private sector firms that have
defined benefit pension schemes in place.

If a company argues successfully in court that continuing to struggle
with pension liabilities would prevent it from emerging from
bankruptcy protection, then it can divest itself of those liabilities.

US Airways did so before it went on to merge with America West in 2005
to become the company it is today. It has since returned to profitability.

Last week, at a hearing of the Senate Commerce Committee, Lautenberg
asked US Airways Chief Executive Doug Parker why, instead of pursuing
Delta, he didn't use the money to cover the deficits in the company's
pension scheme.

Parker responded that the bulk of the funding for the takeover wasn't
US Airways money, saying it was contingent funding from backers
Citigroup Inc. (C) and Morgan Stanley (MS).

Gary Pastorius, a spokesman for the PBGC, said the agency had received
the letter but wouldn't comment other than to say it was looking into
the matter.

No one from US Airways was immediately available to comment on the letter.

-By Corey Boles, Dow Jones Newswires; 202-862-6637;
corey.boles@ dowjones. com

Oct. 26, 2006

Here are the two opinions issued today. The summary is that the
retired pilots lost on the issue of the enhanced benefits to the
active pilots. The plan terminated as of Dec. 30, 2004. The supp
benefits ceased as of October 2005 and UAL gets back the monies it
had been paying into the segregated fund (which will ultimately have
to be distributed to creditors pro rata under the confirmed plan)

Appeals Court Text

Appeals Court II

---

From Jim Morehead:   Nov 8, 2006

One of the moderators asked that I make an attempt to tell some why those who were younger (65 and younger mostly) and those who retired early got the basic heavy screw job from the PBGC.

Perhaps George Mathes, Bob Falco or someone with a more dedicated financial background could more eloquently explain it,but this is the street level view.

It appears that all of the appeals are now done and what you see is what you get. The PBGC decided and it was upheld that the date of pension termination was December 30,2004. That was the sate of Pension Termination or DOPT. Your age then was a basic starting point for PBGC benefits. I recall that the approximate protected dollar value for age 65 to be about $45,000. So if you had benefits of about that number and you were 65 at DOPT, you got this amount of money. This is about $3800/month and many of you had benefits up to this.

Retirees pre mid-1990s had most if not all of their pension in QUALIFIED money meaning the PBGC had full control over this. If said pilot was 65 and had nothing to reduce this amount, then would get this amount.

Fortunately or unfortunately, as the contracts and pensions grew, the total amount of money would not fit into the QUALIFIED grouping, so it became NONQUALIFIED money. This NONQUAL money was paid directly out of UAL's treasury and was based on Profits. Eventually those profits ended and the bankruptcy court permitted United to stop paying the NONQUAL money. The PBGC only has jurisdiction over QUALIFIED money and no control over NONQUALIFIED money.

So as the Contract 2000 was signed and the contracts and pensions got larger, the numbers all went up. In the cases of those retired around 2002-3-4-5, these QUALIFIED moneys far exceeded the amounts allowed to be paid. Keep in mind, that the NONQUAL amounts grew larger as there were rules in place in the amount that would ultimately be known as qualified.

SO we the bankruptcy court's kind help, they TOTALLY eliminated the NONQUAL payments. In my particular case the QUALIFIED was 57% of my monthly pension check meaning 43% was taken away immediately. I can't speak exactly for others ,but many of the people that retired in the 2002-3-4-5 range had percentages of 60/40, 70/30, and numbers like this.

So that wouldn't be so bad to only lose 40%. I know some of you are gagging already.But the furlough was VERY significant in those who started in 1969 and namely about April, 1969 through 1971. There were some from the 1978-1979 group that have retired,but it seems to be those prior to 1971 that were hit the worst. Contract 2000 gave us (finally) the full furlough years for A fund credit,but the PBGC did not recognize all of them. I believe there is still a dispute on what they HAVE PAID and I hope someone will jump in.

There have been 570 (1985) and post 1985 pilots who have retired and many have been 60 if they started late in life at UAL. There also with EAL and PAA guys who started post 1985 as new hires at UAL.

Taking the lump sum further reduced the payments to be made. Lump sum payments consisted of QUALIFIED and NONQUALIFIED money. Only the qualified money could be rolled over and the Nonqual money was paid upon retirement. The various lump sums I am familiar with were in the $60K range and up to almost $300K for those who had no furlough time and generally started in the 1960s. Part of that was nonqualified also. But the point I am making is we do not have American's, USAir's, nor Delta's pension plans which had provisions for lump sums over a million dollars. Friends, neighbors, and even some pilots still think that we got some lump sums of this amount and it is FAR FROM TRUE. But it further reduced the PBGC payouts.

I recall that after about 2000, one did not have to retire early (even as early as one month early which some did) to get the lump sum. Most people took the lump sum and that's why many PBGC payments have been reduced. If the lump sum money was kept by the PBGC, then they would pay you more. But I know no one who didn't take the lump sum unless they were in some divorce action or some other reason.

Now let's look at those OVER 65. Many of their $$$ were protected especially those over 70. If I believe United's number some 39% of the pilots did not take any reduction at all.Of course, most of the pensions were smaller. So the rest took increasingly big hits up to about 80%.

The last factor was age and early retirement which go hand in hand. Somewhere in the late 60 age range meant one would not lose money. The number drops off quickly from 65 down. I believe those around 60-62 may receive a maximum of about $3000/month despite the fact that their earned pensions were much higher. Age was a killer factor because the PBGC believe one 60 will receive benefits for 10 more years than a guy 70 and so on.

I receive $2296/month and that is almost an 80% reduction. This is 3 years in the 2000 contract on the 400 with some on reserve and some a lineholder. It should be noted that the 400 pay fell to 777 pay in March, 2003 and all of the pay fell some 50% or so around that time.

Then , of course, the active pilots split up a bond to make up for their difficulties. United somehow found the money for that and the pilots gave in and let the pensions go away with little to no fight. It will be a "me too" through the airline industry.

So I hope that will explain to anyone who doesn't know why some retirees see this as "non problem" and others have taken a final, fatal major hit having worked at United often over 30 years. This was meant to be general and all of the opinions here are mine. This may be of interest to be shared with family and friends who ask, "how could this happen to you and happen in America". Believe me, it did.

No one knew the play would end this way, but it is a reality.

JIM MOREHEAD

---

Good job Jim. The furloughed guys who finally recieved 100% credit in
the 2000 contract were were originally not credited for any furlough
time by the PBGC. John McDannel went to the LAX PBGC road show and
noticed that furloughees should have been credited with 1/3 of their
furlough time in a previous contract and this had been overlooked by
the PBCG.

Thanks to some hard work by John the PBGC finally gave us
furloughees the 1/3 credit. This raised my check by about $300/mo. in
October. We will not receive back pay for the unpaid credit until the
PBGC comes out with the final numbers. At that time many of us will
owe $$ for the overpayments by the PBGC from Jan 05 until Feb 06. I
retired off the 67 in SEA and lost 63%.

Eric Malm

---

Good recap of our Problem Jim, In my case it was a 76% decrease in pension from what United contracted to pay me. It would be interesting to apply a spread sheet of all who are receiving the United pension, now PBGC paid as to years worked and current pension paid.

When I was recalled from furloughs it was brought to my attention that there were those who retired before my tenure who received little or no pension and were receiving hardship benifits from a fund sponsored by active pilots. For years we have supported those hardship pilots. It is ironic that now pilots in my seniority might might have to be put into that same group. It is hurtful to think that many of our good guys now receive an amount that qualifies for food stamp, social security benifits and welfare after retiring from a profession they served faithfully for over 25 and 30 years.

At age 60-70 jobs are available but jobs that can pay the rent are few and far beween. We again as a group need to look after each other and post available jobs though our network whenever we can. My heart goes out to everyone in this financial critical position. Suggest that anyone in dire situation keep a friend posted so that if we can help someone in need we will.

s/f bob beavis

---

*    *    *   *

Interesting !  Delta Pilots Pension Deal.

Pension loss jolts some ex-Delta pilots
By RUSSELL GRANTHAM, The Atlanta Journal-Constitutio n
Published on: 10/08/06

Jim Cochran expected bad news when he got the big white envelope from Delta Air Lines. What he found inside was worse.

The retired Boeing 767 captain said he expected his $2,460-a-month pension to shrink by about 70 percent after Delta last summer won bankruptcy court approval to terminate its pilot pension plan.

His benefit had already dropped by more than $3,000 when Delta cut part of the program after flying into Chapter 11 a little more than a year ago.

But Cochran saw two things when he opened the envelope. One was a letter from Delta telling him that, as of Oct. 1, his benefit was zero.

The other: coupons to begin paying Delta $907 a month for his family's health insurance, since he no longer had a pension check from which to deduct it.

"This is absurd," said Cochran, 59, who worked for Delta almost 27 years. "I get nothing, and I still owe them $907."

Delta says about 1,300 retired pilots had their monthly pension checks zeroed out by the pilot pension plan termination.

The reason is more complex than the company's simple need to cut retiree costs. It lies in the arcane rules of pension termination — and in a lucrative feature of Delta's pre-bankruptcy pilot contracts.

Delta says pilots who got zeroed out already took a major portion of their pension benefits when they left the airline. Unlike most employees, retiring Delta pilots until 2005 could cash out half their pension benefits in lump sums that sometimes topped $1 million.
Hundreds retired early to take advantage of the clause before it was stopped after Delta's Chapter 11 filing.

If the annualized value of the lump sum exceeds the federal Pension Benefit Guaranty Corp.'s caps on how much a retiree can still collect from the federal insurance agency after a plan is terminated, a retiree gets no more monthly checks.

"These pension checks are only the remaining portion of their benefit after they took the lump sum," said Rob Kight, Delta's vice president in charge of employee benefits and related matters.

Kight said that while about 1,300 ex-pilots' monthly pension checks were wiped out, a slightly larger number of the carrier's oldest pilot retirees saw no reduction. For an additional 3,000-plus in between, pension cuts range from a few percent to almost 100 percent.

Delta recently estimated that retired pilots' average benefit will still be $75,200 on an annualized basis after the termination — a figure that assumes self-disciplined drawdowns from their lump sums. Cochran, for instance, hopes to soon begin tapping a $1.2 million lump
sum that he got when he retired almost three years ago and put into an IRA account.

But the number of pilots who got zeroed out was larger than many expected, and the requirement to pay Delta for health benefits makes the pill even more bitter.

Wendell Lewis, another retired Delta pilot whose monthly pension checks stopped, is part of a group headed by a former pilots union chairman that is appealing U.S. Bankruptcy Judge Adlai Hardin's approval of the plan termination.

"Delta's making enough money to keep the plan," said Lewis. He said Delta has broken its promises to him while maintaining the pension plans of most other employees and retirees.

Indeed, Delta has said it intends to keep a larger pension plan for nonpilot employees. Congress last summer enacted a law giving the airline 17 years — 10 years more than most companies — to bring its plans to full funding. But Delta moved to terminate the pilot plan anyway, and its pilots union had agreed not to object as part of a new contract deal.

"The management didn't take any hits on their pensions. The other employees didn't either. The active pilots negotiated a new pension plan for themselves," said Lewis, 58, who lives in Duluth. "The only ones that are getting their pensions dumped are the retired pilots."

Will Buergey, the former union chairman who is appealing termination, believes most retirees' incomes will be much lower than Delta's estimates.

"My income is substantially lower than $50,000 now," said Buergey, 58, who made more than $300,000 a year before he retired in 2004, just before the first of two deep pay cuts.

Delta says it had to shed the pilots' pension plan to be able to get financing for its planned emergence from bankruptcy next year. Shedding the plan and letting the PBGC take over limited payouts enables Delta to avoid about $2.5 billion in payments needed to bring
that plan to full funding.

"Termination of the pension plan is among the most difficult decisions Delta has had to make in connection with our restructuring process, and we truly regret the impact this has had on you," Delta said in a letter late last month to almost 6,000 retired pilots.

The PBGC caps payouts at $31,000 or less per year for people who retired at 60, the mandatory retirement age for airline pilots. Delta is the third major airline to dump all or part of its pension obligations as part of a recent Chapter 11 reorganization, after US Airways and United.

But Northwest Airlines, which filed for Chapter 11 protection on the same day as Delta, has not moved to shed its employees' pensions.

The PBGC hasn't yet taken over Delta's pilot plan, but the airline was required to recalibrate payouts as if it had.

Delta angered some retirees by warning that it could take the PBGC "several years" to review the airline's estimates, and to send any questions to the airline in writing.

"Due to the complexity of the calculations, the Employee Service Center will not be staffed to answer questions regarding these calculations, " Delta's letter stated.

Cochran hoped to have enough of a monthly benefit left to cover his family's health insurance premiums. He said he's worried about insurance in the future, because his 57-year-old wife, Susan, has diabetes. Adding to the pain of the pension cuts, Delta last week reached agreements with court-appointed retiree creditor groups that will significantly boost almost all retirees' health insurance premiums, pilot and nonpilot alike.

"I can't go [to a new insurer] because of Susan being a Type 1 diabetic. They won't take her," said Cochran.

Still, he is philosophical about Delta's pension-cutting moves. "It will certainly make my income tax a lot easier to figure," he joked. He said he long thought the pension plan termination was inevitable.

"I don't blame Delta. They're trying to survive," he said. "I just knew this was going to be a dead-end battle, which is why I retired."

Cochran said he flew extra trips before retiring, boosting his income to $240,000 a year. The couple paid off their house and cars, and his wife later went back to work.

He said their expenses are less than $10,000 a year now, and they banked nearly $1.7 million when he retired two years ago, including savings from his Delta wages and the $1.2 million pension lump sum.

"I plan to live conservatively and keep our costs down and wait for the dust to settle," he said.

Lewis also retired four years earlier than he had planned, in order to save his lump sum pension benefit, also $1.2 million.

At that time, in late 2004, Delta had just averted a bankruptcy filing, and waves of pilots were retiring. He didn't believe the carrier's pension plan could long continue to pay out lump sums.

"It was just too big a risk," said Lewis. "I felt like I had to do it for my family, even though I wanted to stay and fly."

As he suspected, several months later, the pension plan halted paying out lump sums. More than 2,300 pilots had retired since 2003, draining plan assets.

Lewis initially got a $6,500-a-month pension to support himself, his wife and daughter while he launched a boat appraisal business. But Delta moved quickly to cut pension expenses, winning court approval to stop paying the portion of retired pilots' and executives' pensions that exceeded federal income limits on traditional pensions.

That move caused Lewis' pension checks to drop to $1,700 a month, he said.

Now that income is gone, too, as a result of the pension plan termination. Lewis said his incoming cash will now be about $24,000 a year from the proceeds of a home refinancing and other savings. He's too young to draw Social Security, and he had put the lump sum into an
IRA that can't be reached without penalties for another year and a half.

"We kind of expected that the benefit would go to zero, but it's a shock when that letter shows up," said Lewis. "It's going to be tight living off of no income for a year and a half." In the meantime, he and his wife are considering going back to work or selling their house.

"We'll survive somehow.It's just not going to be as much fun as I thought it would be," he said.

*    *    *   *

---

Sept. 15, 2006

Dear Fellow Screwees:

This is the response I just got from the Democrat Senator in Colorado.

Larry Walters

Dear Larry:

Thank you for writing about the pension plans of United Airlines employees. I appreciate hearing your thoughts.

As you know, United Airlines is an important business in Colorado, in particular Denver. The health and vitality of the airline is of critical concern to me, as this company supports so many Colorado families and communities. Their futures are the futures of Colorado.

I was disappointed that United Airlines was not able to hold onto their pension plan obligations long enough for the Pension Protection Act recently signed into law to take effect.

On that note, Congress must be committed to providing thorough oversight and accountability into PBGC decisions to default company pensions – such as United Airlines. I am committed to this principle. Every step necessary must be taken to ensure companies do not end up in default. Where default is imminent, pension takeover by the PBGC must strictly be a result of last available option.

Thank you again for contacting me with your thoughts and concerns. As the Senate continues to address pension solvency, I will not forget the situation of United Airlines, and their employees who will not receive their full pensions.

Sincerely,

Ken Salazar
United States Senator

*    *    *   *
09-05-2006 1:58 PM

By BARBARA ORTUTAY, AP Business Writer

WHITE PLAINS, N.Y. -- A federal bankruptcy judge on Tuesday approved Delta Air Lines Inc.'s request to terminate its pilots' pension plan.

Judge Adlai Hardin's decision came after a splinter group representing retired pilots formally withdrew its objection to the termination of the plan, which included an option for pilots to retire early at the age of 50 and take out half their entitlements in one lump sum payment.

Delta, the nation's third-largest carrier, must still go to the federal government's pension agency, the Pension Benefit Guaranty Corp., to officially end the plan. At that time, the PBGC will take over the plan and pay pilots reduced benefits. The change would be retroactive to Sept. 2.

Delta said current retired pilots would still receive, on average, about $75,200 a year, including the lump sum payment. It did not provide an updated estimate of how much pilots who retire in the future without a lump sum will get.

The carrier told Hardin on Friday it had no choice but to eliminate its pilots' pension plan if it is to come out from bankruptcy and remain afloat.

In a settlement reached on Labor Day, the group representing about 100 retired pilots agreed to pull its objections to the plan's termination. In exchange, Delta agreed to pay $500,000 to the group, known as DP2, to cover fees and expenses. Also part of the settlement was an agreement from both sides to no longer "criticize or disparage one another."

"I think we would all agree that termination of the pension plan is not a good thing," said Sherwin Kaplan, a lawyer for DP2, at the hearing. The plan's end, he added, will cause "enormous hardships" to the pensioners, many of whom had worked for decades only to see their entitlements cut.

But in the end, DP2 and its lawyers concluded that the group simply did not have the financial resources to successfully battle its termination.

The judge called Delta's evidence and arguments showing that it has no choice but to end the plan "overwhelming." He said he read most if not all, of the scores of letters sent to him by retired pilots opposing the plan's end.

Delta's active pilots have already agreed not to object to the termination request as part of a $280-million-dollar-a-year concessions agreement first reached with management in April.

Termination of the pension plan means the end to the ability of Delta pilots who retire in the future to collect half of their pension benefits in a lump sum. That lump sum drove hundreds of pilots to retire, many of them early, before Delta filed for bankruptcy in September 2005. Delta said that more than 90 percent of its retiring pilots have chosen to take out the lump sum payments.

Because of a liquidity shortfall in the pension plan, the lump sum option has not been available since last October.

Delta says it does not have enough money to cover the pilot pensions. As of July 1, the pilot pension plan was projected to have assets of 39 percent of its current liability _ $1.6 billion of assets versus $4.1 billion in liabilities _ according to a Delta court filing from Aug 4.

Atlanta-based Delta has said it hopes to keep the pension plan for its ground workers and flight attendants, which does not have a lump sum option.

Delta hopes to emerge from bankruptcy protection by mid-2007.

UAL Corp.'s United Airlines, the second-largest carrier in the country, terminated its pilots' pension plan in 2004, while it was under bankruptcy protection. Kaplan had also represented the U.S. Airways retirees. A federal judge upheld that termination in June.

*    *    *   *

Thursday, August 31, 2006

Reported Like its all over at UAL!

Retired Delta pilots fight pension termination

By Harry R. Weber
Associated Press

ATLANTA -- Bankrupt Delta Air Lines is defending itself against objections filed by retired pilots to the company's request in bankruptcy court to terminate its pilot pension plan.

A hearing on the Atlanta company's motion is scheduled for tomorrow. Delta has asked for the plan covering active and retired pilots to end Saturday.

Active pilots agreed not to object as part of a $280-million-a-year concessions package reached in April.

The Pension Benefit Guaranty Corp., the government's pension insurer, has not objected, but says in a filing that Delta should meet strict criteria before the request is approved.

The official committee of unsecured creditors in the bankruptcy case has filed a motion supporting Delta's request to terminate the pension plan.

Delta's effort to terminate its pilots pension plan, which is significantly underfunded, had been expected, as the nation's No. 3 carrier seeks to emerge from Chapter 11 by the middle of next year a leaner airline.

UAL's United Airlines, the nation's No. 2 carrier, terminated pilot pensions when it was in bankruptcy. Delta has said a pension relief bill passed by Congress and signed by President Bush should help it save the pension plan covering employees other than pilots.

Also yesterday, Delta said it made a profit of $69 million in July, its first monthly gain since the company entered Chapter 11.

Delta said in a bankruptcy court filing that excluding reorganization items, it had net income of $99 million in July. Revenue for the 31-day period was $1.7 billion. The net profit for the month was the first since Delta entered bankruptcy in September 2005, spokeswoman Betsy Talton said.

A year ago, Delta said it had a net loss of $41 million in July. It did not list the revenue for July 2005.

Delta has lost more than $16 billion since January 2001.

Delta has promised its pilots a $650 million note if the pilot pension is terminated. Delta also has promised the pilots a $2.1 billion unsecured claim.

But a number of retired Delta pilots have filed objections over the last several weeks to Delta's pension termination request. A group representing more than 100 retired pilots also has filed an objection.

Delta pilots' pension plan in jeopardy

Tampa Bay Business Journal - 2:57 PM EDT Thursday

Delta Airlines is still trying to terminate the pension plan of its active and retired pilots. It has asked the court to make the termination effective Saturday, Sept. 2.

Active pilots are not opposing the termination as agreed to in the settlement with the company signed last April. Both the pension insurer, Pension Benefit Guaranty Corp., and unsecured creditors support the motion to terminate the plan.

Delta (Pink Sheets: DALRQ) is trying to terminate the pension plan as part of its restructuring to emerge from bankruptcy protection in 2007.

Delta has promised its pilots a $650 million note in the event the pilot pension is terminated as well as a $2.1 billion unsecured claim.

Only the retired pilots are objecting to the proposed settlement. There is precedent for the pension dismissal, as United Airlines terminated its pilots' pension when it was in bankruptcy.

If the court in New York approves Delta's request to cancel its pilots' pension, the PBGC would take over the plan and pay active pilots a reduced benefit based on when they retire and other factors, the Associated Press reported. Retired pilots may receive a reduced benefit.

A Delta court filing and the PBGC differ on calculations of how much pilots will receive after termination. A PBGC spokesman said the actual amount of benefits would not be known until after the plan is terminated and that the benefit will depend on individual factors and the limits under the law.

Once the plan is terminated, the company's pilots won't be entitled to the hefty lump sum payments under the existing pension plan, which allows pilots to retire at 50 and receive half their benefits in a one-time payout and the rest in an annuity later. A liquidity shortfall in the pension fund prevented pilots from cashing in their lump sums after Oct. 1, 2005, and the door has not reopened since.
Delete Reply Forward Spam Move...
Previous

THE ASSOCIATED PRESS NYTimes

August 22, 2006 Judge OKs Delta Pension Deal With Group
http://tinyurl. com/plulz

WHITE PLAINS, N.Y. (AP) -- A bankruptcy judge on Tuesday approved an
agreement between Delta Air Lines Inc. and a group of retired pilots
that paves the way for the airline to pay $9 million in pension
obligations.

The deal was presented ahead of a hearing that begins next Friday,
when Delta will ask the court to terminate its obligations under
qualified pension plans. The company anticipates heated opposition
from retired pilots who oppose the motion.

The pilots group, the Delta Pilots' Pension Preservation Organization,
withdrew earlier objections to reach a deal with the airline late last
month.

The group, called DP3, represents about 2,850 of 5,300 retired pilots,
a lawyer for the company said. Of those, 3,642 are eligible for
payments from the $9 million fund, which is worth roughly 11.5 percent
of the total value of non-qualified pensions as of last September.

At the Tuesday hearing, Judge Adlai Hardin also heard arguments over a
dispute between Delta and the U.S. General Services Administration
about a bill the agency believed it shouldn't have to pay.

The government asked the court permission to withhold payment of $23.8
million it owes for tickets mostly bought in the fall of last year. It
argued that it should be allowed to deduct that amount from $26.2
million it overpaid for tickets that went unused, mostly in 2001 and 2002.

Pierre Armand, an assistant U.S. attorney in the Southern District of
New York, argued that the Transportation Act supports the government's
right not to pay.

''Delta is asking this court to permit it to violate a federal statute
entitling the government to adjust Delta's present and future bills to
account for the public funds that Delta wrongfully received,'' the
U.S. attorney's office argued in a court filing.

Hardin did not rule on the matter before adjourning.

As part of the pension agreement, the retired pilots also have the
right to pursue an unsecured claim to seek an estimated $75 million,
the equivalent value of pensions accruing at $7 million a month
beginning at the time Delta entered bankruptcy in September 2005.

''The vast majority are very pleased that DP3 was able to get them,
from our perspective, $9 million real extra dollars by virtue of their
tenacity,'' Delta attorney Marshall Huebner said in court about the
retired pilots group's advocacy.

Delta will be helped by a bill to overhaul pensions that was signed by
President Bush on Thursday. Among other items, the new law gives
bankrupt airlines, which have frozen their plans, an additional 10
years, for a total of 17, to meet their funding obligations.

Other airlines that have active plans have 10 years.
============ ========= ========= ======

Delta retired pilots group shifts its stance on pensions

More time sought to study impact of new legislation
By RUSSELL GRANTHAM, The Atlanta Journal-Constitutio n
Published on: 08/22/06

A group representing retired pilots is having second thoughts about
its decision not to oppose Delta Air Lines' plans to terminate their
pension plan.

The group, DP3, asked the federal bankruptcy court to delay a Sept. 1
hearing on Delta's request to terminate the pension plan. The group
argued that it needs more time to study pension relief legislation
signed into law last week that could open a way for Delta to save the
pilots' pensions.

Delta wants to shed the deeply underfunded pension plan effective
Sept. 2, shifting responsibility for further benefit payouts to a
quasi-federal agency.

DP3's motion to oppose the termination came late last week, only days
before a hearing set for today on the group's earlier pact with Delta.
That agreement would have ended the retired pilots' opposition to
dumping their pension plan on the Pension Benefit Guaranty Corp.

Several retired pilots opposed DP3's earlier deal, which will be
reviewed today in U.S. Bankruptcy Judge Adlai Hardin's court in White
Plains, N.Y. Delta's lawyers said all the retirees' objections have
been resolved except that of former pilots union Chairman William
Buergey. He is complaining that Delta's retired pilots will get too
little compensation for lost benefits compared to their counterparts
at United and US Airways, which also terminated pilots' pension plans.

DP3, also known as the Delta Pilots Pension Preservation Organization,
agreed in May to drop most of its complaints against Delta in exchange
for $9 million and an unsecured claim for certain retirement benefits
that Delta stopped paying when it filed for Chapter 11 last year.

However, DP3 decided to renew its opposition to Delta's pension plans
because of a provision in pension relief legislation enacted last week.

"One of the changes contained in its 900 pages of new provisions and
amendments will alter governing pension law dramatically, " the group
said in a court filing. The law, it notes, would ban bankrupt
companies from paying out lump sums to retirees if their pension plan
is underfunded.

That provision doesn't take effect until 2010, but the group said
that, if the hastily drafted bill is modifed through a "technical
correction" or new legislation, it could offer relief to the airline
and its retiring pilots.

Before Delta asked to terminate the pension plan, blocking that
option, retiring pilots could cash out up to half of their pension
benefits as a lump sum typically worth several hundred thousand dollars.

If lump sum payments were prohibited by law, Delta might be able to
meet its pension obligations.

A spokeswoman for Delta said the new legislation may stop lump sums in
the future but not soon enough to solve the carrier's problems.

"We believe that the new pension law clearly does not relieve the
Delta pilot retirement plan of the requirement to make lump sum
payments," said Gina Laughlin, with Delta.

Delta has previously argued that the new legislation would allow it to
preserve non-pilot employees' pensions, but that the pilots' pension
plan couldn't be salvaged because the lump sum feature is too costly.

In its court filings, Delta said if the pension plan is not
terminated, mass pilot retirements this fall could disrupt operations
and cause a cash drain of up to $2 billion. Delta said that threat
will scare off future lenders, wrecking its plans to emerge from
bankruptcy next year.

Find this article at:
http://www.ajc. com/business/ content/business /stories/ 0822bizdelta. html

Aug. 8, 2006 - From Aviation Daily.
Senators Promise To Revisit Airline Pensions After Recess:
By Adrian Schofield

 Senate leaders last week vowed to return to the airline pension debate after the August recess, allaying concerns from some Senators that the pension legislation passed late Thursday night gives an unfair advantage to Northwest and Delta.

 The pension bill passed 93-5 on the Senate floor late Thursday night, and Republican leaders were successful in preventing any amendments to the bill. This was considered crucial by supporters of the bill, because any amendments would have caused significant delay as the legislation would have been sent back to the House for their approval after the August recess.

 The bill allows airlines with frozen pension plans -- such as Northwest and Delta -- to amortize pension deficits over 17 years, and also lets them assume an interest rate of 8.85% to calculate returns. Airlines that do not freeze their plans are allowed a 10-year amortization, just three years more than current rules allow. Northwest warned it needed the pension bill passed before the August recess.

 American and Continental supported the pension bill but argued they should be given the same relief as carriers that have frozen their pension plans. The two carriers garnered significant Senate support for their position, and this threatened the swift passage of the pension bill.

 However, an informal agreement worked out during floor debate caused most of the dissenting Senators to withdraw their objections. "Although we are not in a position to amend the bill before us, I can promise the Senators that I will continue to work with them on this issue after we return from the August recess," said Senate Majority Leader Bill Frist (R-Tenn.). He added that "this issue needs to be reviewed further this year to assure an equitable result."

 Congressional sources told The DAILY that changes to the pension bill will be handled either with a technical corrections bill or an amendment to must-pass legislation such as an appropriations bill. Sen. Kay Bailey Hutchison (R-Tex.) indicated the disparity in the interest rates is the biggest concern. American and Continental would have to use the corporate bond yield -- about 6.2% -- to calculate returns and would have to pay hundreds of millions more than Delta and Northwest, she said.

 Will Ris, American's Senior VP-Government Affairs, said the carrier was "pleased to see many [Senators] strongly urge that the disparity in treatment among airlines be addressed upon the return of Congress from the August recess...there is significant consensus in both the House and the Senate that the discount interest rate applied to airlines should be more fairly equalized." Delta and Northwest praised the Senate for passing the bill without amendment and urged President Bush to sign it quickly

AMR may ask for freeze

By TREBOR BANSTETTER STAR-TELEGRAMSTAFF WRITER

American Airlines could soon be facing intense pressure to freeze its pension plans if a bill approved last week by the U.S. House of Representatives becomes law.

The measure, which has not passed the U.S. Senate, would grant American some reprieve from its pension obligations, which cost airlines hundreds of millions of dollars a year.

But it would give bankrupt rivals Northwest Airlines and Delta Air Lines even greater relief, handing them a significant financial advantage.

"It's really a double standard," said airline analyst Henry Harteveldt of Forrester Research in San Francisco. "You have to ask if it's fair to penalize airlines who have run their businesses better and stayed out of bankruptcy."

American officials declined to comment on the bill, pointing out that the situation could change as the Senate considers the measure this week. But American's interest in the pension issue is acute. The airline could be in an even more difficult position if a bill fails to pass, because it could have to pay more than $1 billion into the plan next year.

"This is a very complicated, very important issue for American Airlines and its employees," said Gregg Overman, a spokesman for the Allied Pilots Association, the union that represents American's pilots.

Sen. John Cornyn, R-Texas, told reporters Monday that he was concerned about the bill, which on the Senate side is part of a larger tax package. "The pension part of it treats airlines that have avoided bankruptcy disadvantageously, primarily Continental and American Airlines of Texas, and helps those who have declared bankruptcy," he said. That "just goes to prove that in Washington, if you're not careful, no good deed goes unpunished," he said.

Cornyn said he hasn't decided whether his pension concerns will be strong enough for him to vote against the entire tax package.
American, like other airlines and large companies, has substantially underfunded its pension plans.

Depending on how it's accounted, according to the airline, the shortfall is either $2.3 billion or $3.2 billion.
American has kept its pension plans intact despite its financial squeeze in recent years, as has Continental Airlines of Houston.
Other carriers, including Delta Air Lines and Northwest Airlines, have frozen their plans. That means they will pay employee benefits that have already been earned but will no longer allow workers to accrue retirement allowances. Employees at those airlines have been shifted to defined-contribution programs such as 401(k) plans.

United Airlines and US Airways, which have both gone through bankruptcy, terminated their plans entirely, handing them over to the federal government to administer.

In 2004, Congress granted the airlines a two-year respite from having to pay off their shortfalls. That will expire at the end of this year, and if pension rules aren't revised in the meantime, American will have to fund some of its obligation next year.
That would mean a significant financial hit on a company that is struggling to return to profitability after losing nearly $8 billion since 2000.The House bill approved last week provides some breathing room, allowing American and Continental to fund their pension programs over 10 years.
But the law gives Northwest and Delta 17 years and gives them a friendlier way to determine their total obligations.
American and Continental could get the same benefit if they freeze their plans before December 2007, according to airline analyst Jamie Baker of JPMorgan Securities.
Baker predicts that if the law passes, American will ask its employees to agree to freeze the plan. Under union contracts, workers must approve any changes to the pensions. American's contracts expire in 2008.
"This implies management must seize the next 17 months to bring labor to the table prematurely and sell the need for pension parity," Baker said in an investment report Monday. That has union officials worried.
Overman of the pilots union said maintaining the pension is a crucial issue for that work group. The pilots' approval of concessions in 2003 "was predicated on the notion of preserving the pension," he said. Analyst Harteveldt said the next few days could be key. The Senate breaks for its August recess at the end of the week.

Staff Writer Dave Montgomery contributed to this article.

WHY SHOULD I CARE?

Congress is considering whether to grant pension-funding leeway to American Airlines and other carriers. Here's how it could affect you:
If you work for American, you could see your pension benefits frozen. Such a move would have to be approved by unions first. The airline would be under intense competitive pressure.
If you travel, you could see higher fares if American isn't granted any pension reprieve. The huge financial obligations would drive the airline to bring in as much money as possible from customers.

If you're a taxpayer, you could have to pay for a bailout of the federal Pension Benefit Guarantee Corp. if Delta and Northwest airlines terminate their pension plans. The agency pays for abandoned pensions through corporate fees, but it is strained, and an infusion of taxpayer dollars could be required in the future to keep it afloat.
Trebor Banstetter, (817) 390-7064 tbanstetter@star-telegram.com

Airline Pensions: a Vanishing Act? 

  Friday July 28, 2006 7:03pm 

 Washington (AP) - Only two major airlines — American and Continental — have active defined-benefit pension plans, according to a June report by Congress' Government Accountability Office.All other major carriers have either terminated all or some of their defined-benefit retirement plans and turned their assets over to the Pension Benefit Guaranty Corp., the government agency that insures pension benefits, or have frozen their plans and quit making contributions, the GAO said.

 When a plan is frozen, no more benefits accumulate for its participants, but assets and liabilities can change.

Delta Air Lines Inc. has frozen all of its pension plans. Delta says its pilot and non-pilot pension plans are underfunded by $6.37 billion. The PBGC estimated in September that Delta's pensions are underfunded by $10.6 billion. Delta has notified PBGC that it intends to terminate its pilots' pension plan as of Sept. 2. A bankruptcy court would have to approve that. Delta has lobbied for the pension bill in Congress, but has offered no assurances it will maintain its non-pilot pension plans if the bill becomes law.

 Northwest Airlines Corp. has frozen its pension plans and reported that they are underfunded by $3.7 billion. The PBGC estimated last September that Northwest's pension plans were underfunded by $5.7 billion.

 Continental Airlines Inc. reported at the end of 2005 that its pension plans were underfunded by $1.2 billion, an amount that decreased from $1.6 billion the prior year. The airline has frozen its pilots' pension plan.

American Airlines, a unit of AMR Corp., reported that its pension plans were underfunded by $2.3 billion as of Dec. 31, 2005.

 Continental and American haven't filed for bankruptcy and PBGC hasn't publicly estimated their pension liabilities. A PBGC estimate of a plan's underfunding normally doesn't become public until the agency files a claim in bankruptcy cases.

 Two carriers — United, part of UAL Corp., and US Airways Group Inc. — have already turned their pension plans over to the PBGC after declaring bankruptcy.

 US Airways eliminated its three employee pension plans in March 2003. United Airlines dropped its four employee plans in December 2004. PBGC assumed about $10 billion in underfunded pension liabilities from the two airlines.

---

Delta to Request End to Pilot Pensions
Friday June 16, 3:10 pm ET
By Harry R. Weber, AP Business Writer
Delta to File Request With Bankruptcy Court Judge to Terminate Pilots'
Pensions

ATLANTA (AP) -- Delta Air Lines Inc. will file a request Monday to terminate its pilots' pension plan, the company's chief executive said in a letter to a lawmaker Friday.

CEO Gerald Grinstein said in the letter to Sen. Johnny Isakson, R-Ga., that the nation's third-largest carrier will ask that the pilots' pension plan be terminated effective Sept. 2.

The move was not unexpected, and Grinstein said the Atlanta-based airline is still seeking pension reform in Congress in hopes of preserving the pension plan for other employees.

"The unfortunate reality is that even if a pension reform bill containing airline relief passes, unless the pilot plan is terminated, Delta cannot successfully restructure and emerge from bankruptcy," Grinstein wrote.

He added that the relief Delta is seeking is necessary "if we are to preserve tens of thousands of jobs and provide ongoing service to tens of millions of customers in local communities around the world."

Once the notice is made to the Pension Benefit Guaranty Corp. on Monday, then the company will seek approval by a judge. There likely will be objections, though the pilots, for their part, have agreed not to object.

The letter to Isakson, who has been pushing for pension reform in Congress, also was sent to more than a dozen other members of Congress.

Delta has lost more than $14 billion in the last five years. It filed for bankruptcy last September and since then it has cut more jobs, rejected aircraft leases and reaped cost savings through pay cuts for employees.

http://biz.yahoo.com/ap/060616/delta_pilots.html?.v=10

May 15.06

Click on this link .  You all recognize these things but it's good reading anyway.

http://www.pbs.org/wgbh/pages/frontline/retirement/

May 14,06

Hello fellow airmen and women,

Just last week I visited the PBGC offices in Sarasota, FL. A few things of note.

1/ I spoke with John Lynn and later with Martha Kidd and was assured that my wife's widows benefits were secured as they were previously included in UAL's pension considerations. I just wanted to hear what the letter already said.

2/ Secondly, for those who can't attend one of the road shows, they have prepared a booklet consisting of photo reproductions of the slide show presentation and some information on calculations and other stuff in the back nothing real specific. Still it will show you what the shows were about. I was told that the actual figures come out of the actuaries cave up in the DC area. (Actually, I think it is in Alexandria).
I picked mine up my copy at their office but it should be available if you call or write them.

3/ For those who worry that the PBGC isn't solvent, note that their offices occupy the 7th floor of a 12 floor splendid blue-glass tower overlooking beautiful Sarasota bay. Of course, you and I are paying the rent. However, it looks like they are staying
around for a while.

We will be coming back north in a week or so for the summer and fall. As always I will be reading the web site with great interest. It continues to be the best source of collected material we have.

regards,
John A. Lane, Jr.
UAL 031508
Ret 12/01/98

May 5th 2006.    Congressman: OK of Northwest pilots' deal may save pensions
Associated Press

EAGAN, Minn. - A new contract ratified by pilots at Northwest Airlines Corp. will increase the prospects of legislation to help save the carrier's pension plans, according to U.S. Rep. John Kline.

Northwest's pension plans are underfunded by $3.7 billion, and the carrier has asked Congress for up to 20 years to fully fund them. United Airlines and US Airways, both restructured in bankruptcy, terminated their pension plans.

Kline, R-Minn., said Thursday that "there is a certainty" that Northwest would have to terminate its plans unless Congress agrees "to stretch out the payments in a way that lets them come out of bankruptcy with the pension plans intact."

Eagan-based Northwest is Michigan's leading passenger air carrier and handles a majority of the passengers at Detroit Metropolitan Airport, one of its three hubs. The other are at Minneappolis and Memphis, Tenn.

Pilots for Northwest on Wednesday approved a long-term contract that includes $358 million in givebacks and assumes that the airline preserves its defined-benefit pension plan.

Kline, who serves on the House-Senate Pension Conference Committee, said the vote gives more leverage to lawmakers working on an airline provision in a major pension reform bill.

Duane Woerth, president of the Air Line Pilots Association, called the ratification a "monumentally, hugely important moment" in the union's drive to save the pilots' pension plan.

In recent weeks, Woerth said, supporters of the airline pension measure wanted assurances that they were wisely spending their political capital in helping the airlines.

"Once it became clear that the Delta pilot pension was not going to be saved, that really just left the Northwest pension" plan, Woerth said.

Woerth said that he and AFL-CIO President John Sweeney met Thursday with several Democratic senators about the pension legislation. Many senators "expressed great relief that the (Northwest) pilots passed their deal, because they knew that this was going to put the airline provision in total jeopardy" if the agreement had been rejected, Woerth said.

Northwest pilots voted in January to freeze the defined-benefit pension plan and, going forward, they would take part in 401(k)-style retirement plans.

Northwest CEO Doug Steenland and Woerth have been advocating that model for more than a year.

"Everybody is trying to be responsible here," said Andrea Fischer Newman, Northwest's senior vice president of government affairs. She said Northwest wants more time to meet its financial obligations

---

Court Dismisses US Airways Pilots' Suit
Tuesday May 2, 2:36 pm ET
By Marcy Gordon, AP Business Writer
Appeals Court Orders US Airways Pilots' Suit Over Pensions Dismissed

WASHINGTON (AP) -- A federal appeals court on Tuesday ordered
dismissal of a lawsuit that US Airways pilots filed against a federal
agency in a fight over pension benefits, saying the claims must be
pursued through administrative channels.  (ed. ie to their final solution as determined by the PBCG. )

---

US pension agency takes over plans at Aloha Air
Fri Apr 28, 2006 10:58 AM ET

WASHINGTON, April 28 (Reuters) - U.S. pension insurers said on Friday they have assumed plans covering nearly 4,000 employees and retirees of Aloha Airlines Inc.

Aloha recently emerged from bankruptcy protection and its three terminated plans are 55 percent funded with $190 million in assets and $345 million in promised benefits, the Pension Benefit Guaranty Corp. said.

The agency expects to cover $117 million of the $155 million shortfall.

The plans cover pilots, machinists and other workers at privately held Aloha, which is based in Honolulu.

Aloha sought to terminate pension plans to save money as part of its restructuring. It reached an agreement with the PBGC to terminate three plans but preserve a fourth covering dispatchers.

The PBGC has also assumed pension plans of workers at US Airways (LCC.N: Quote, Profile, Research) and United Airlines (UAUA.O: Quote, Profile, Research), both of which restructured in Chapter 11. US Airways merged with America West.
© Reuters 2006. All Rights Reserved.

March 31, 2006

Link to: Appeals Court Publication

Bottom Line:  NO Relief

---

March 1, 2006

ANALYSIS OF UNITED AIRLINES PROPOSED

“BUY DOWN” OF THE NON-QUALFIED PENSION OF

CAPT. REAL BUT ANONYMOUS

United proposes to set the present value of the stream of income due each retired pilot under the non-qualified portion of the pension before applying the estimated 4 to 8 cents (it seems to be .10405 cents converted at $35.91 per new United stock share) valuation on the dollar to settle this part of the bankruptcy proceedings. Although there are several values (interest and mortality) necessary to determine this lump sum the prime determinate is the assumed interest rate. United and the United Retired Pilots Benefit Protective Association (URPBPA) have both set forth a proposed amount but neither has made known the factors (and arguments) in their calculations. United, tilting things in their favor, has used an unrealistically high rate (7.55%, my estimate. I’ve been informed that United is using 6.25% - but then they must be manipulating the mortality tables. PBGC is using 3.8%) similar to what got the pension into trouble in the first place; there is no security, suitable for pensions, that yields that rate available in the market today. Consequently, without transparent disclosure of variables, the dollar amount varies considerably according to the information each participant plugs into the formula. Our solution with explanation follows:

Date of Birth: March 4, 1937

Age at non-qualified termination October 1, 2005: 68.5 years

Life Expectancy: 13.6 years - 1995 Department Of Health And Human Services Table

Monthly non-qualified payment: $1,196.41

Assumed interest rate: 4.53% - New 30-year Treasury bond, issued February 9, 2006, day’s high rate. This rate is close to other Treasury issues

Protocol: Hewlett-Packard HP-12C calculator and attendant July 1987 Owner’s Handbook And Problem-Solving Guide

Results:

Lump sum for insurance annuity: $157,450.00 (company quote)

Our calculations with above givens: $145,332.00

URPBPA Proposal: $134,929.00

United Proposal: $118,671.00

A difference of $38,779 between high and low figures; not even in the “ball park” for reasonable people.

It must be remembered that the check received from United was a net or “clean” amount. If the individual is now required to administer his own fund be will incur additional expenses – thus further reducing his yield and increasing the lump sum required – similar to United. United’s expenses were 5.9% (December 31, 2004 Annual Report Pilot Pension Plan.) and an individual would probably pay twice that.

It’s obvious that without a balancing power base the employees, working and retired, are nothing more than pawns in a rather malicious game.

***********************************************************************

President George W. Bush
Washington, DC 20500
Fax: 202-456-2461

February 23, 2006

Subject: STOP THE PBGC FROM TAKING MY PENSION

Dear Mister President:

I am one of your supporters. My family and I along with thousands of other
retirees need your help now. Federal District Court Judge Darrah has overruled
Bankruptcy Court Judge Wedoff who allowed the Pension Benefit Guaranty
Corporation (PBGC) to seize the United Airlines pilots’ pension funds. You are the
only one who can stop the PBGC from appealing that District Court ruling. The
PBGC should never have taken over our defined benefit pension plan. Here is
why:

* The PBGC was created by ERISA in 1974 to “encourage the continuation and
maintenance of private sector defined benefit plans.� However, the PBGC is
acting in concert with United Airlines, facilitating the termination of our
pension plan without considering viable alternatives. The PBGC is not acting in
the interest of retirees.

* A corporation should not be permitted to default on its pension plans
without proving the inability to sustain the them. United Airlines never proved
that it could not afford to continue the pilots’ pension plan. The PBGC’s own
independent actuary found that United can afford to keep our plan.

* Retired United pilots were never allowed representation in the bankruptcy
court proceedings. The Air Line Pilots Association (ALPA) represents only the
active pilots, not the retired pilots. We were denied due process.

* Allowing United Airlines to default on its pension obligations will
encourage other airlines to default as well in order to remain competitive The PBGC
is already running an enormous deficit that is expected to grow rapidly.
PBGC liabilities may fall to taxpayers.

* Honoring obligations to the retired pilots will not harm United Airlines.
The financial outlook for post-bankruptcy United is bright. However, obscene
and undeserved self-awards of bonuses and incentives to senior managers is
likely to have a more deleterious effect on profits and employee morale than
honoring promises to retired employees who are too old to recover. Pilots will
be harmed in greater measure with the seizure of their pensions by the PBGC
than any other group. In some cases, retired pilots will suffer a loss of a much
as two-thirds of their pension income.

Sincerely,

Larry Walters, Captain (retired)
3056 8th St., Boulder, CO 80304
303-443-9906, walterslnd@cs.com

In an e-mail to Jim Hosking Bob McGowan wrote this note:

Feb 22, 06 - Asking GW Bush to Save Us

Jim,

Why is there a reluctance to plead with the Joker in the White House?

The very sorry fact is that our President appointed everyone of the Directors
of PBGC and they are carrying out the wishes of the Bush Administration
to tear down gains made by organized labor. Their Charter is just as meaningless
as those in every Federal Agency that are being ignored daily.

If we are down to pleading with our idiot President to save our pensions,
we are really scraping the bottom of the barrel. I've been privy to right wing political
conversations for years between labor hating elected officials. This is their dream
come true: To erase all gains made by collective bargaining with those "Damn Labor Unions".

United's loss of the Federal Loan guarantee was a precision hit on a corporation with some of
the most lucrative gains by organized labor. Our Chapter 11 filing was very welcomed by the Bushies.

I personally know five members of Congress in my area and they all turned against me and our
pensions. And they are very happy about it.

Bob

---

Feb 20, 2006

"George Mathes" <senesius@sbcglobal.net>

You are misinterpreting Doug’s information. If a participant took the PLSA there is a reduction in the benefit. That reduction is applied by both UAL and the PBGC.

Neither Doug nor myself considered the PBGC would use the LOWEST IRC limit in their calculation, however. Our information was that they used the average for the three years used in the FAE calculation. You can see from Carl’s calculation that they used the lowest one for his three years (1999).

Let’s hope that gets changed in the final benefit calculation.

George

---

Feb 19, 2006

PBGC numbers finally figured out .

Exact correct calculations computed by a fellow retired UAL pilot (Doug) and prior accountant with large accounting firm.

Numbers came out identical with his estimated check notification.

Feel free to share this information as you see fit.

I had 33.5 years of credited service, never furloughed. I took the life
only option with
no death benefit and no partial lump sum distribution. My qualified
monthly pension
from United was $7,058.45. I retired 8/1/01 at age 60.
The PBGC, at my request, sent me this detailed explanation of my
benefit calculation:
Priority Category 3 FAE (1999 Compensation Limit of $160,000)
$13,333.33
Priority Category 3 Credited Service (excludes furlough) 33.5
Estimated Priority Category 3 Accrued Benefits
0.0141 x $13,333.33 x 33.5 years $6,298.00
Priority Category 3 Early Retirement Factor 1
Priority Category 3 Conversion Factor 1.032
Estimated Priority Category 3 Benefit before Offsets
($6298.00 x 1.000 x 1.032) $6,499.54
Priority Category 3 Offset for Partial Lump Sum Amount 0
Priority Category 3 Offset for Purchased Annuity 0
Estimated Priority Category 3 Benefit after Offsets $6,499.54
Priority Category 3 Estimated Funded Percent 80.30%
Estimated Funded Priority Category 3 Benefit $5,219.13

---

For your interest. The Ground Plan and the PPGC

Here are the added highlights of the UAL Ground Plan. Keep in mind the administrative parts of the plan are done identically to the Management and Public Contact Plan. The variables are the formulas and amount of plan assets and liabilities.

Estimated Funding Status:

Total Plan Liabilities $ 4.1 billion
Total Plan Assets 1.3 billion
Total Underfunding 2.8 billion
Guaranteed liabilities 3.3 billion

Same forms of payment are offered as in Management and Public Contact Plan

Date of Termination 3/11/2005
Date of PBGC Trusteeship
5/23/2005

5 year vesting rule for all plans

When can you retire with unreduced benefit?
Normal retirement- Age 65
60/5 retirement Age 60 and 5 years continuous service.

When can you retire with reduced benefits?

55/5 retirement Age 55 and 5 years continuous service.

Pension benefit formula is years of participation service x benefit rate, depending on your labor group.

Age Group 1 Group 2 Group 3
65 $ 87.00 $73.70 $ 60.00
60 87.00 73.70 60.00
59 84.39 71.49 58.20
58 81.78 69.28 56.40
57 79.17 67.07 54.60
56 76.56 64.86 52.80
55 73.95 62.65 51.00

Maximum insurance limit under PBGC is for someone age 65 at $3,801.14 per month and varies accordingly depending on the employee age on the day of Plan Termination(March 11, 2005)

Phase in limit on the plan benefit increase due to contract improvements within 5 years before the plan ended.

For mechanics and Security Officers the benefit improvements were made on March 14, 2002 and for Ramp and Stores the improvements were amended on May 14, 2002. These increases to you pension amounts are phased in at 40 %. The 60% is the reduction you all recently saw when PBGC reduced your payments.

Keep in mind you also had involvement in the purchased annuities in 1985, and those sums are seperate from the actual pension dollars themselves. The annuities are guaranteed and are now being paid directly by the insurance companies themselves . The PBGC distributes the pension part of your package directly from State Street Bank.

Again if you can get to a meeting I would encourage you to do so, if not then by all means get on to the PBGC web page, or speak to their representatives at the numbers I gave you in the first email to set up your account and to ask any pertinent question you may have.

The Ground Plan number is 19922400

Linda.

---

Hi,
I've had to contact the Pension Dept lately. Here is how:
To find personnel in Pensions

Log onto Skynet.
On Home Page look to right side for Divisions (Departments); scroll down to Human Resources.
The Human Resources page will open. At the top of the page, to the right of People Search, put in WHQTE (pension dept) and click on “Search”.
The Pension Deptartment page will open showing all of the personnel.

I've talked to Dorothy Karpierz and Trudy Eltzel - both represented in bankruptcy court. All other labor groups were represented by their respective unions and have signed agreements with United Airlines replacing their pensions with other plans. The retired pilots were denied representation in bankruptcy court by Judge Wedoff when he said only ALPA represents the pilots of United Airlines. ALPA in the same court said, “We do not represent the retired pilots.” The SAM employees do not have a union or an association to represent them at the present time.

United and the PBGC say that Judge Darrah’s decision is only a technicality that will be quickly and easily overturned in District court. That is one position.

The opposite position is URPBPA’s position which is the pilot retirees have never had their due process and deserve their day in court and that it is far from only a procedural matter. URPBPA also has pointed out that it has never been proven in a court of law that United could not afford the pilot’s pension plan.

The PBGC originally sued United Airlines to prevent them from terminating their plans and shifting their liabilities to the PBGC and is on record stating that they believed that United could afford one or more of their pension plans. Now that Judge Darrah has reversed Judge Wedoff’s decision the pilot pension plan is the only Defined Benefit pension plan in effect at United Airlines.

Many feel that it is not a coincidence that Judge Darrah issued his opinion one day after United exited bankruptcy court hence eliminating any possible last minute tweaking that may have prevented a trial outside of bankruptcy court. United exited bankruptcy on February 1 and Judge Darrah issued his opinion on February 2.

United filed a motion in Judge Darrah’s court for a hearing to request reversal of Judge Darrah’s decision which had been scheduled for February 10. United withdrew this request before the hearing.

URPBPA is now waiting to see what the PBGC will do; it appears that if there is an appeal it will come from the PBGC not United Airlines. The PBGC will either appeal Judge Darrah’s decision or seek a termination in District Court from Judge Joan Lefkow, the judge that originally was assigned the case, but yielded the case to Judge Wedoff’s bankruptcy court.

This puts the PBGC in a peculiar position for in the PBGC Charter it states:

The PBGC was created by the Employee Retirement Income Security Act of 1974 to encourage the continuation and maintenance of private-sector defined benefit pension plans, provide timely and uninterrupted payment of pension benefits.

It seems to be a real stretch of the imagination to believe that the PBGC going to court to terminate the pilot’s pension plan is encouraging the continuation and maintenance of private-sector defined benefit pension plans.

To this date United has made no additional court filings related to Judge Darrah’s decision.

The PBGC has not signaled their intent either.

Be cautious, anyone that tells you they know what is going to happen in this case is full of something and it is not knowledge.

This case could very well become a landmark case. This case if it is decided in favor of restoring the pilot pension plan and that decision is upheld at the Appellate level or the Supreme Court, it could very well stop this march into bankruptcy court by corporations in order to terminate their pension plans.

ALPA has taken the same position as United Airlines and believes Judge Darrah’s position to be only a procedural matter. If ALPA does not want to renegotiate their position with United Airlines this makes a good case for the original URPBPA proposed split/freeze plan in which the retiree’s plan would be split from the active pilots plan. The split/freeze would allow the active pilots to receive what they negotiated with United Airlines in exchange for not opposing the termination of the pilot plan in court and the retirees would get what they had been promised.

Keep the faith, we will win this one!   Jim Hosking

---

*    *    *   *

From: PBGC Customer Service <mypension@pbgc.gov>
Date: February 8, 2006 2:56:23 PM PST
To: mcgowanbob@mac.com
Subject: Re: Personal pension inquiry from PBGC.gov [REF:1705417789]
Reply-To: mypension@pbgc.gov
Dear Mr. McGowan:

Thank you for contacting the Pension Benefit Guaranty Corporation, (PBGC). This is to acknowledge and respond to your e-mail dated February 7, 2006.

The decision to return the United Pilots plan to United is still under review.? At this time the PBGC continues to be administrator for the plan.? Whenever the final decision is made, it will be communicated to all parties involved, as soon as possible.

At this time, this is all the information we have.

Should you have additional questions or concerns, please do not hesitate to contact us at our toll-free number, 800-400-7242, between the hours of 8AM - 7PM EST, Monday through Friday.? Please call before 5PM EST, if you wish your concerns to be addressed by the plan administrator managing your specific pension plan.

As always, it is our pleasure to be of service.

Sincerely,

The Pension Benefit Guaranty Corporation

Customer Contact Center

*    *    *   *

wan

---

Date: Mon, 06 Feb 2006 09:02:47 -0500 (EST)
From: Albam46@aol.com
Subject: Judges reversal of pension termination

Dear Fellow Retirees,

Thank for your welcome aboard letter. Obviously, I was hoping to become a proud member of your organization under better circumstances, but thanks to crack United management that is not the case. I know I am preaching to the choir here so there is no need to elaborate.

However, there is one situation in which you may be able to help. I retired January 31, 2006, with an annuity start date of February 1st. With the reversal of the bankruptcy judge's order as I see it I am now retired under the pension plan that was in effect. However, since United Airlines has not been processing retirement applications for the last six months or so, I am somewhat in limbo. Can you provide any insight into the fastest, most efficient way to get my application processed with United Airlines, i.e. should I go to World Headquarters, who should I contact directly, any shortcuts, etc???

Any suggestions, comments, or advice would be greatly appreciated.

Thanks for your time and effort.

A. L. "Mac" McAlister

Cleve:

This man has a good question. It is one of many that are floating around out there. Maybe we could get URPBPA's attorney to field some of them. In a macro sense, (1)the plan might not terminate at all, or (2) it might be terminated on a different date or (3) it may still terminate on 12-30-04. PBGC might be appointed temporary trustee in which case I suppose they would proceed as if nothing had changed until everyone agrees that a change has become effective----that might take a long time!

Doug, 2-7-06

*    *    *   *

Retired United Pilots Endure Severe Pension Cuts

By David Louie

Feb. 1 - KGO - United emerged from 1,100 days in bankruptcy protection today, claiming to be a leaner more cost efficient airline whose future remains uncertain. What is certain is that the nation's number two air carrier has 30 percent fewer employees, 20 percent fewer planes and 20 percent lower operating costs. Its 400 top managers now own a $115 million dollar stake in the company, while its 58,000 employees are working harder for less. And then there are those who've retired.

United's retired pilots started receiving notices this week from the federal agency that took over the airline's beleaguered pension fund. They are shocked. They're in their sixties and most of them Vietnam War fighter pilots who were trained to be cool. So cool, that they have mostly bitten their lips about the impact of United's bankruptcy on them. They are silent no longer.

Retired United pilots gather monthly for lunch. They were fuming today over letters from the Pension Benefit Guarantee Corporation, spelling out how much the bankruptcy will cost them. The cuts range from 70 to 90 percent. Bill Rogalski was one of the hardest hit. His monthly pension of $8,900 will drop 89 percent, leaving a big hole in his retirement budget.
Bill Rogalski, retired Union pilot: "It's $1100 a month. $1140.36, so if you figure it out times 12, that's not much at the end of the year." Several are talking about selling their homes. One pilot told us that he's taken a job at home depot for $10 an hour to make ends meet. These are pilots who once flew aircraft worth millions of dollars and who were responsible for the safety of as many as 400 passengers on a jumbo jet. George Hise flew 33 years with United. He flew 200 missions in the Vietnam War. A Naval Academy graduate, he has always been a believer in this country. People can't fathom his pension is being cut 75 percent.

George Hise, 33-year United captain: "They don't believe that this country would allow a retirement benefit to be taken away and given as bonuses to the management that took the company into bankruptcy." Retired pilots have also been dealt a second blow. The government pension agency is penalizing them because they didn't work until they turned 65. Yet federal law says commercial pilots must retire at 60.

Harry Stonelake was a United pilot for over 30 years. Harry Stonelake, retired United captain: "We fought for our country, and by God, our country should fight for us. This is thievery. If I stole 65 percent of the money out of your pocket, you'd have me arrested."

So when they get together, these retirees no longer have the company pride they once did. Harry Stonelake: "This is my United wings. I've got them upside down because I'm ashamed to wear them anymore."

It is out of character for these veteran pilots to be so vocal and angry. They join a growing group of American workers who have lost most or all of their pensions due to corporate bankruptcies.

*    *    *   *

Pilot pension ruling debated
Bankruptcy court wrong United venue, district judge says
By Mark Skertic, Chicago Tribune staff writer

Published February 4, 2006

A bankruptcy judge did not have the authority to cancel the pension
plan of United Airlines' pilots, a district court has ruled.

U.S. District Judge John Darrah ruled Thursday that the decision to
terminate the plan should have been made in the district court.

Darrah's decision has renewed hopes in some quarters that the employee
pensions United said it could no longer afford will be revived.

But the Elk Grove Township-based airline called the ruling a decision
on a legal technicality and said it was confident its pensions would
not be restored.

After more than three years, United's parent, UAL Corp., exited
bankruptcy protection this week. The airline was able to attract $3
billion in exit financing based on a financial plan that did not
include any pension liabilities.

"It has never been proven in a court of law that United could not
afford this pension plan," said Jack Carriglio, attorney for about
6,000 retired pilots and their survivors. "Or that the many, many
lenders who are willing to lend billions of dollars to United Airlines
would be deterred by United having to live up to its obligations to
retired pilots."

Retirees now have their benefits administered by the Pension Benefit
Guaranty Corp., a federal agency that insures pension plans. The
agency, which assumed control of all of United's pension obligations,
has caps on its payouts, a situation that tends to affect pilots more
than other employees because they were compensated at higher levels
and will lose the most.

Instead of pensions, United now offers 401(k) defined-contribution
plans.

If United were forced to restore the pilots' pension plan, it likely
would ignite a firestorm of protest from other unions. Elk Grove
Township-based United was able to wear down resistance to ending the
plans only after it vowed that no labor group would retain a
company-backed pension.

It was an action by the pension agency that led to Darrah's ruling.
The agency filed a complaint in December 2004 in U.S. District Court
in Chicago arguing that the pilot plan should be terminated
immediately because potential losses to the pension agency would
"increase unreasonably" the longer the airline maintained it.

United successfully sought to have the matter moved to bankruptcy
court. That was the wrong place for the issue to be considered, since
it was not directly part of United's bankruptcy, Darrah ruled.

Spokesmen for the Air Line Pilots Association, which represents active
pilots, and the Pension Benefit Guaranty Corp. declined comment. Both
said the matter is under review by attorneys.

A spokeswoman for United called it "a procedural finding that did not
address the merits of ... termination of the pilot pension plan."

"We are confident that upon review of the substance, the district
court will uphold the termination," spokeswoman Jean Medina said.

It is unlikely that Darrah's ruling could result in the restoration of
United's pension plans, said Douglas Baird, a bankruptcy expert at the
University of Chicago Law School.

"This is the district court being protective of its jurisdiction,"
Baird said.

"There isn't any ruling on the merits here. It does really have the
heft and smell of a procedural matter that isn't even about an issue
that is integral to United's reorganization."

United's agreements with the pension agency allowed the airline to
walk away from nearly $10 billion in unfunded pension liabilities.

In return, the agency was partially compensated with stock in the
post-bankruptcy United. On Thursday, the first day of trading, the
agency sold about $2.5 billion of its $5.6 billion claim.

"Total sale proceeds amounted to about $450 million, or 18 cents on
the dollar," said pension agency spokesman Jeffrey Speicher.

Some of that money will be distributed to United pension recipients to
reduce losses they incurred when the agency took over their plans,
Speicher said.

*    *    *   *

February 2, 2006

To: UAL Pilots

From: MEC Communications

Today in Chicago, Federal District Court Judge John Darrah issued a ruling in the appeal of the PBGC pension plan termination case. The Judge ruled that Bankruptcy Court Judge Wedoff should not have entered a final order when he issued his ruling terminating the plan on October 26th, 2005. Because the Bankruptcy Court has limited jurisdiction over matters that are not strictly bankruptcy issues, the District Court Judge ruled that the Bankruptcy Judge should have issued proposed findings of fact and conclusions of law after the trial, and forwarded those to the Federal District Court Judge in Chicago who originally had the case for review. The final order would then have come from the Federal District Court Judge after an opportunity for all interested parties to object to any part of Judge's Wedoff's ruling.

Today's ruling by Judge Darrah does not address any of the merits of the PBGC's termination action. This is a ruling only on technical grounds that sends the case back to the Bankruptcy Court to issue a ruling in the way that is required where non-bankruptcy issues are involved. Technically, the Bankruptcy Court's order terminating the plan is reversed, but this does not mean that the District Court ruled the termination was improper. Instead, it means that the Bankruptcy Judge should have referred his decision to the District Court to issue a final ruling.

We do not know what United will do in response to this ruling, although the Bankruptcy Judge may act very quickly to reissue the same decision as findings of fact and conclusions of law and send it to the District Court. ALPA is very carefully evaluating it options and will respond appropriately. We will keep you advised.

From Arvid's E-MAIL 

Arvi...
A few minutes ago, I got my long-awaited and dreaded letter from the PBGC informing me, now that I was ward of the US government, what my pension will be for the rest of my life. Disappointing...yes. Devastating...no, unlike so many of our peers. My heart goes out to the younger retirees. By virtue of a birth date, they have had the bulk of their pensions stolen. While the pirates who ruined United line their pockets.
I write to compliment Captain Doug Wilsman. I have been one of his 57 "volunteers", providing him with my retirement paperwork. He recently sent me his estimate of my PBGC benefit...and today I can confirm he nailed it within 34 cents per month! The man is a mathematical genius! I know I speak for many of us when I say..."Doug, you made the last three years bearable. I can't thank you enough..." Tom Lambrick

                 *     *     *    *    *    *    *    *

From: DHWilsman@aol.com [mailto:DHWilsman@aol.com]
Sent: Sunday, January 22, 2006 12:19 AM
To: TeeGastonDavis@aol.com
Cc: DHWilsman@aol.com
Subject: synopsis needed

Tom:

Yesterday our bankruptcy judge signed an order blessing United's Plan of reorganization. Roger Hall's attorneys wrote today on the web that "As a result of this order, United will no longer be operating as a bankrupt company."

It occurs to me that my audience of about 3,200 pilot retirees and widows would really benefit from reading an account of what has transpired on US Airways with your interface with PBGC after your defined benefit plan was terminated on 3-31-03----almost three years now. I am wondering if such a history has already been written which you could share with us or if not, whether you would do us a big favor and write one we could publish.

I would have it published in an edition of our monthly newsletter and put on our Web site.

What do you say?

Doug Wilsman, 1-21-06

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Dear Doug,

(Sunday, January 22, 2006) We are very grateful for the UAL pension reports that we had somehow obtained by the time we first learned that our pension would be terminated. Your insightful analyses gave us an invaluable head start and continue to be a rich resource. In fact, I quoted you in my very first email update to our group. So, of course, I am happy to honor your request for a synopsis of our first three years before the PBGC. Maybe it will repay you in small part for all you have done for us. I believe we’ve copied you on all of our email updates so you already know most everything our members know.

Basically, we’ve approached the PBGC issues as matters of law, not of public opinion. The relief we seek can only be found in a court of law. More on this later. Initially, US Airways and its actuary, Towers and Perrin, estimated PC-3 to be 85% funded. PBGC, as is its customary practice, used US Airways’ PC-3 estimates to reduce every retiree’s benefit to 85% of its original value, in total disregard of its own Maximum Guarantee, which increases actuarially with age. In general, the up-sloping guarantee line begins to cross above the actual benefit line at about age 69 so that a 69 or 70 year old or older should have received his full pre-termination benefit. In addition, US Airways and PBGC had a dust up over the amount of compensation PBGC should receive for its takeover of the under funded pension. This resulted in PBGC’s own actuary testifying, not once but twice, that PC-3 was 98.5% funded. We had already filed suit in US District Court and when we raised these issues PBGC reluctantly corrected the benefits being paid. The basic pre-termination benefit was increased to no less than 98% of the original benefit and those who were about 69 or older were restored to 100% of the original benefit.

However, as they say, the devil is in the details. So, while the gross issues described above were a huge step forward, the overall matter remains in a state of flux. Various rules severely impact the benefit of a majority of our members. These include the 5-year look back rule that disallows pension enhancements enacted within the five years immediately preceding plan termination. We have 326 retirees who received an enhanced early retirement benefit pursuant to a letter of agreement with an effective date more than five years pre-termination. PBGC is disallowing this enhancement based on a specious interpretation that substitutes an open enrollment period that ends within the five year period for the effective date on the face of the agreement. We are also severely impacted by the three-year rollback rule that calculates PBGC benefits at the levels they would have been had the retiree retired three years or more prior to plan termination. In the case of partial lump sum settlements, PBGC is inappropriately deducting the annuity value of the lump sum, which has already been paid, from the maximum guarantee that is applicable only to annuities that are in pay status. There are other significant issues that I prefer not to articulate at this point since we need to preserve flexibility in our litigation strategy.

Aside from the more or less global issues, such as the above, there are a multitude of parochial issues affecting subgroups of our membership. Former Piedmont pilots have a normal retirement COLA that is unique to them which PBGC is not fully honoring even though it has been in effect at least 20 years. There are issues unique to former PSA pilots and to pre-1973 Allegheny pilots to be resolved. There are also issues of significance to those who were disabled when they retired—both totally and permanently and otherwise.

So the big picture is that there are a myriad of issues that create a tender box of competing interests with a huge potential for trouble. One of our handicaps is that we don’t have a finely tuned political structure with local councils, master councils and numerous committees. Our greatest strength is that we don’t have local councils, master councils and committees (and crew rooms). PBGC has attempted to ignite this tender box by overtly reminding those attending regional meetings that our success in the early retirement issue would come at the expense of everyone else. It is manifestly in our interest not to allow them to succeed.

My overall impression of the first three years of our mission is that ERISA which governs many of our issues is a very complex and specialized corner of the law. It requires attorneys who specialize entirely or almost entirely in this field. Consequently they are expensive. Therefore, our first challenge is to raise the necessary financial resources. Given the fact that our source for these funds is a group of folks whose lone common characteristic is the financial challenge they are experiencing due to the termination of their pension plan, their financial support has been truly remarkable.

The second challenge is to somehow maintain the cohesion and unity of our group when so much of what we do is governed by arcane law with which we are unfamiliar and which is so often counterintuitive. A central dispute now before the Court of Appeals, for example, is whether or not PBGC is a fiduciary when it acts as trustee of the Pilots Pension Plan. If PBGC is found to be a fiduciary, its failure to pay benefits in accordance with the statutes and the terms of our collectively bargained pension would constitute a breach of its duty and, therefore, be litigable. Whereas, if it is not found to be a fiduciary, the exhaustion clause of the Railway Labor Act may require that we arbitrate the disputes at the Retirement Board before litigating the issue in court. ALPA, which appoints two of the members of the Board has consistently maintained that it doesn’t represent retirees. Moreover, recovery of benefits by the retirees may come at the expense of the two non-retirees on the Board, their constituents and their sponsor, the MEC, whose agreements we are challenging, in many cases. It is a conspicuous conflict of interests but that argument has not been successful in skipping arbitration in the past, with courts ruling that if such a conflict results in a bad arbitration award you can then go to court, having exhausted your administrative remedies.

In summary, money is the mother’s milk of pension litigation. Without it, and lots of it, the cause is hopeless. PBGC openly boasts that it has more money than we and that it can outlast us. Unity and cohesion are necessary conditions for raising sufficient funds to dissuade PBGC from that belief. We constantly remind ourselves that we are diminished when we castigate PBGC, US Airways, ALPA, the political environment or other things about which passions run high but over which we have no control. In the end, this will be resolved in a court of law, not in the court of public opinion. My aunt, a surrogate mother in many ways, told me years ago that “who the gods would destroy, first they make angry.” How much worse would it be to make ourselves angry?

Best regards,

Tom Davis

(Doug's note: Tom is the leader of the US Airways Retired Pilots' dealing with lawyers, fund raising and communications.)

---

1-18-06

Wilsman's Swan Song

(1-18-2006) My job is done. I started 44 months ago to give people a vague idea of what their benefits would be if PBGC took over our beloved A-plan. Now in about 10 days, PBGC is going to mail a letter to everyone whose benefits will be reduced ----effective with the March 1st check. It's a-no-news-is-good-news situation. If you don't get a letter that means they will not be reducing your benefits.

The letters are supposed to be mailed on Friday January 27th. They will evidently contain the arithmetic PBGC used to calculate the reduced amount and a schedule of Road Show appearances starting on April 3rd, 2006. If you have difficulty understanding the reduction amount in their January letter, I am told PBGC will welcome your questions at the Road Show or in a call to their 800 number for an explanation.

They politely told me that they would not be answering any of my general questions like, for example, what method would they use to deal with participants who opted for the Level Pay Feature----except to indicate that my guess was way off base. As nearly as I can tell, when PBGC gets done, the Level Pay Feature will definitely not be level pay anymore.

I will be looking forward to hearing from my 57 early warning volunteers after they receive their PBGC letters (from those who will be reduced). The idea is to compare what PBGC says it will pay with the amount I estimated PBGC would pay. I will report in a general way how that exercise works out and then quietly fade into the woodwork.

It's been interesting! Doug

1/04/2006

What's Next?

Now that we have all gotten our first checks from PBGC, the next thing to watch for is a letter in the mail from PBGC giving a 30 day notice that benefits will be reduced.  That will happen for about 3,600 pilot plan retirees----maybe around the end of January if PBGC intend to start the reduced amounts with the March 1st check.

Today in conversations with PBGC consultants in Sarasota, I was told that the announcements of lower amounts will contain an explanation of how PBGC arrived at its lower number. There are still some details I am hoping to be able to forward at this Web-site, as soon as my pending questions are answered.

Below is a table that contains some basic information given to me by my Early Warning Volunteers. The group is sorted by age on the Date of Plan Termination on 12-30-04. The number 1 entry is me. These folks have sent me the post-retirement papers they got from UAL and I have estimated their PBGC post-termination benefits. The idea is for them to E-mail me the amount PBGC tells them they will get so I can report here, early on, whether PBGC seems to be following its own rules.

As an aside, I have registered with PBGC to get an on-line Personal Benefit Account (My PBA). Just follow directions at www.pbgc.gov

As I get more details on how things will work,  I will send them to Arvi for posting here. Doug