Originally Posted by
sailingfun
I would point out that retirement is the future for all pilots. A matrix has been used before at Delta. It was put into place to try and give every pilot the same retirement benefit. This was to insure a junior pilot got the same retirement as a senior pilot with the frozen DB plan. When the frozen DB plan was terminated many dead zone pilots were getting little or nothing in DC funding. They were told by the union that if the DB plan terminated then there would be a sort of reverse matrix to compensate for the years of low or zero funding. That matrix never came about however we did get the note.
The intitial distribution method on the note was to compensate pilots for the lost DB plan. They put together a set of assumptions on time value and investment performance over time to see where each pilot would end up retirement wise. They then ran the numbers based on those assumptions.
The result was really ugly for the junior pilots with the bottom half of the seniority list essentially getting nothing from the note. They decided despite the fact that the numbers supported this it was politically unacceptable. They then decided to plus each pilot up to 205,000 dollars FAE in the old frozen plan and rerun the numbers. Even with the plus up it was still ugly for the bottom half of the list. So they added yet another feature which was a years of service minimum. This produced the final method to distribute the money. It was a method that now had little to do with the original goal of providing each pilot a roughly equal retirement.
A similiar thing happened over at UAL. ALPA just settled a lawsuit over that at UAL for 44 million. There are rumors that a lawsuit will be filed against DALPA by the years end. A settlement of that lawsuit may require a matrix or cash payout. DALPA started with the attempt to clean things up with the note as you state but in the end abandoned that concept. There is still cleanup left to be done.
Thanks,
The Note was paid in consideration for concessions made. I actually took the trouble to ask MEC members whether it was a retirement offset. The answer was that it could not
possibly be a retirement offset, because the PBGC would have a valid claim to it. Then two events occured:
1) The value of the Claim, which noone expected to be worth anything, was run up inadvertently by Doug Parker's hostile takeover attempt. That put a lot of money in everyone's pocket.
2) The PBGC settled.
This laid open the door for some recovery with the Note, and the very money that I was told was not, and could not be, a retirement offset, became "retirement-related".
I don't begrudge that attempt to make people whole, even if I ended up taking a bath on the distribution. I guess my error is that I'm too young. You forget to mention that, even after the very last step, the result was STILL ugly for the lower half. But I guess some very senior guys threatened to sue, and I think the top payout was $475 K, with most of my captains getting in the $250 K's, while I got $23K or so.
And nobody likes to be 23K'd...
So, while I believe the final use of the Note was contrary to the way it was marketed when we voted for LOA 51 (and that the PBGC was duped), I'm at least glad there was enough money available to make the attempt to make people whole.
Now, to come back around to the matrix, there were many problems, but one of the most bizarre aspects was that it discriminated based on
age, not just LOS. I had guys in my own new-hire getting about 3 times more money. There is no moral justification for this. If they got hired at a later age, it's not my fault. Chances are, the by-product is that they built another retirement, somewhere else.
So, if there are lawsuits, it isn't because the DC plan distribution is unfair.
I've been hearing for a very long time that the UAL distribution was grossly unfair, and that there were extraordinary differences in distribution, like ratios of as much as 400K:5K. I don't think we went down that road. I think we laid out a clear rationale to our process, and we tried explicitly to sell the Note distribution as a rectification for "retirement-related" concessions. This
as part of LOA 51, which also put down the matrix. And everything else forward was distributed with a common DC rate. This is the
system we chose to avoid the problems experienced at UAL. It's the system that was presented as fair. It's not the sytem I was sold when I voted for LOA 51, but... I guess it's good enough. Let's move on.