Q.17: If a person continues in service or is reemployed as a pilot after age 60, when will he/she be eligible to begin receiving benefits from his/her DB plan? Also, if a retired pilot is reemployed as a pilot after age 60, will his/her DB plan benefits that were already in pay status continue to be paid during the period of reemployment? (The Answer below assumes the DB plan's NRA is age 60.)
A.17: 1. In this Part 1 of A.17, it is assumed that the person continues in service with, or is reemployed by, the same airline (or a corporate successor of the same airline) that maintains or had maintained the DB plan.
Payment of DB plan benefits is governed by the terms of the plan (see below for special rules applicable to terminated plans that are being administered by PBGC). A DB plan may provide either that plan benefits will be paid, or that plan benefits will not be paid, during a plan participant's period of continued employment or reemployment after age 60. However, in the case of reemployment, a participant's retirement benefits that were already in pay status must continue to be paid during the period of reemployment after age 60, unless the DB plan provides that benefits will be suspended during the period of reemployment and the plan administrator provides the participant with advance written notice of such suspension.
Several pilot DB plans have been terminated and are now being administered by the Pension Benefit Guaranty Corporation (PBGC). The NRA under these DB plans is age 60. Under PBGC policy, a pilot in a terminated plan may elect to commence receiving his/her pension benefits from PBGC at age 60, whether or not he/she continues in service with, or is reemployed by, his/her airline after age 60, even if the plan prior to its termination would have prohibited such in-service distributions. PBGC policy also permits a pilot in a terminated plan to elect to commence receiving pension benefits from PBGC after age 60, whether or not he/she is then employed or reemployed by the airline, at which time he/she will receive an actuarially increased retirement benefit (except that there will be no actuarial increase applied to Priority Category 3 benefits).
In addition, under PBGC policy, if a retired pilot with early retirement benefits already in pay status is reemployed by his/her airline prior to reaching NRA, PBGC will suspend payment of the monthly retirement benefits during the period of reemployment, unless the terminated plan had specifically provided that benefits would not be suspended upon reemployment. If a retired pilot with retirement benefits already in pay status is reemployed by his/her airline on or after NRA, PBGC will continue paying (and will not suspend) the monthly retirement benefits, regardless of the provisions of the terminated plan with respect to reemployment.
Some pilot DB plans have been terminated in a standard termination, with full accrued benefits provided by an insurance company under an insurance policy purchased by the plan. Under those plans, the terms of the insurance policy will govern the payment of retirement benefits to a participant who continues in service or is reemployed as a pilot by his/her airline after age 60.
2. In this Part 2 of A.17, it is assumed that the person continues in service with, or is reemployed by, a different company than the airline (or a corporate successor of the airline) that maintains or had maintained the DB plan.
While employed by a different company, the person may elect to begin receiving benefits from the DB plan at his/her early retirement age or later, and benefits that were already in pay status under the DB plan will continue without suspension. Put another way, a person's employment by a company that is unrelated to the one that had maintained the DB plan has no impact on the person's eligibility under the plan to begin or continue receiving retirement benefits under the plan. This is true whether or not the DB plan has terminated and whether or not the DB plan is being administered by the PBGC.
3. This Part 3 of A.17 discusses rules requiring participants to begin receiving benefits by a certain date.
In the case of an ongoing DB plan, the Internal Revenue Code requires a participant to begin receiving benefits by April 1 following the later of the year he/she attains age 70-1/2 or the year he/she retires from employment with the company maintaining the plan. In the case of a terminated DB plan that is being administered by PBGC, PBGC policy requires a participant to begin receiving benefits no later than April 1 following the year he/she attains age 70-1/2, whether or not he/she has retired from employment with the company that had previously maintained the plan.
Q.18: What is the impact of FTEPA on LTD plans?
A.18: Most LTD benefit plans are impacted substantially by FTEPA in the areas of eligibility, duration and cost.
Regarding eligibility, a pilot employed after age 60 will be covered for LTD benefits in the same manner as other actively-employed pilots.
Regarding duration of LTD benefits, in general, if before FTEPA an LTD plan provided that LTD benefits cease upon attainment of age 60 or the federally-mandated retirement age, then after FTEPA, the LTD plan must provide that LTD benefits cease no earlier than attainment of age 65 or the new, federally-mandated retirement age.
It is likely that the costs of pilot LTD plans will increase after FTEPA, due to the coverage of an older workforce and the extension of the duration of LTD benefit payments.
Note that an LTD plan may provide (or may be amended to provide), that LTD benefits will cease on account of reasons unrelated to age. For example, a plan may limit monthly benefits to a specified dollar amount, such as $5,000 per month, or may limit the duration of benefits that are attributable to certain causes, such as mental illness, emotional disorders, alcoholism and drug addiction, to a specified length, such as 24 months. In addition, LTD benefits may be offset by a participant’s other income, such as income from other employment, Social Security disability and retirement benefits, workers compensation benefits, and pension benefits. An LTD plan may also provide that LTD benefits are offset by retirement benefits that a participant who is age 62 or older is eligible to receive but does not actually receive (so long as the participant is not required to retire to receive those benefits).
Q.19: What is the impact of FTEPA on an active pilot's health benefits (medical, prescription, dental and vision)?
A.19: A pilot who continues in service or is reemployed after age 60 will be covered for health benefits in the same manner as other actively-employed pilots. It is likely that the costs of active pilot health benefits will increase after FTEPA, due to the coverage of an older workforce.
Q.20: What is the impact of FTEPA on retiree medical benefits?
A.20: In general, a pilot who retires after age 60 will be eligible for the same retiree medical benefits during retirement as a pilot who retires at age 60. If the applicable CBA presently provides employer-paid subsidies toward the cost of retiree medical coverage (pre-Medicare coverage and/or post-Medicare coverage), then a pilot retiring after age 60 will be eligible for the same subsidies during retirement as a pilot retiring at age 60. If no pre-Medicare retiree medical coverage is provided, then a pilot who retires at age 65 will become covered by Medicare immediately upon retirement and will experience no gap in medical coverage between the date coverage as an active pilot ceases and the date coverage under Medicare begins.
FTEPA will have no impact on the retiree medical benefits of a pilot who retired before FTEPA was enacted; however, in the case of a retired pilot who is reemployed as a pilot after age 60, different retiree medical benefits could apply under the applicable CBA upon the pilot's subsequent re-retirement.
Q.21: What is the impact of FTEPA on an active pilot's life insurance benefits?
A.21: A person who continues in service or is reemployed as a pilot after age 60 will be covered for life insurance benefits in the same manner as other actively-employed pilots. Under most employer-paid life insurance plans for active pilots, the life insurance benefit is expressed as either a flat dollar amount or as a multiple of the pilot's earnings, without regard to the active pilot's age. It is likely that the costs of active pilot life insurance coverage will increase after FTEPA, due to the coverage of an older workforce.
Q.22: Is more information available about the impact of FTEPA on pilots' retirement and insurance benefits?
A.22: For specific information, please contact your MEC Benefits Specialist (if your MEC has one), or an R&I Field Representative or Benefits Attorney in the R&I Department. In addition, you may find more specific information in the following documents:
ØMemo prepared by the R&I Department, June 1, 2007, "Age 60: Impact of Increase in Mandatory Retirement Age on Pilot Retirement and Insurance Benefits" (previously provided with Jim Wilson's memo of November 27, 2007, or available from the R&I Department)
ØExcel file prepared by the R&I Department in June, 2007, identifying references to age in various carrier-specific benefit plans (previously provided with Jim Wilson's memo of November 30, 2007, or available from the R&I Department)
ØLetter dated December 26, 2007, from Captain John Prater to Mr. Charles Millard, Executive Director of PBGC, requesting guidance, and confirmation of ALPA's analysis, with respect to certain FTEPA-related issues concerning pilot DB plans administered by PBGC (copy attached to the email by which this FAQ is transmitted)
ØLetter dated January 11, 2008, from Mr. Bennie Hagans, Director of Benefits Administration and Payment Department of PBGC, to Captain John Prater giving guidance requested by ALPA on December 26, 2007 (copy attached to the email by which this FAQ is transmitted)
[1] In Questions 12 through 22 the term “pilot” includes Flight Engineers and Second Officers.