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Release Date: 01/16/2003
Release Number: 03-3
Contact Name: Sharon Morrissey
Phone Number: 202.693.8664
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Washington, DC - The U.S. Department of
Labor’s Pension and Welfare Benefits Administration today announced a
proposed exemption that would allow Northwest Airlines, Inc., if granted,
to contribute stock of a regional airline affiliate in lieu of cash to its
three defined benefit pension plans. |
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Northwest Airlines, Inc., headquartered in Eagan,
Minnesota, sponsors three defined benefit plans for 72,754 employees
nationwide. Cumulatively, the plans have $4.381 billion in assets as of
January 2002. |
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The airline requested the exemption to maintain a high
level of liquidity during the current economic challenges facing the
airline industry. The proposed exemption is designed to allow Northwest to
meet its long-term pension plan funding obligations while maintaining its
financial liquidity. |
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If granted, the exemption would allow Northwest
Airlines to meet its current obligation to make contributions to its plans
through the in-kind contribution of stock of Pinnacle Airlines, a regional
Northwest affiliate. A contribution is due on January 15, 2003. |
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The Employee Retirement Income Security Act (ERISA)
generally prohibits in-kind contributions, except in certain statutory
exceptions. The law does give the department authority, however, to grant
exemptions that protect the interests of plan participants and
beneficiaries. |
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The department has used its exemption authority to
grant relief for similar types of transactions in the past. The department
is willing to consider such exemption applications when the value of the
contributed assets can be independently determined and the plan receives
actual ownership rights to those assets. |
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The proposed exemption would permit: 1) in-kind
contribution of shares of Pinnacle Airlines stock to the defined benefit
plans in order to satisfy all or part of Northwest’s minimum funding
requirements; 2) holding of the stock by the plans; 3) the sale of the
stock by the plans to Northwest; and 4) acquisition and exercise by the
plans of a put option granted by Northwest. |
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The notice of a proposed exemption, scheduled to be
published in the January 17, 2003 Federal Register, gives the public an
opportunity to present comments. Comments on the proposal and any requests
for a public hearing should be submitted by March 3, 2003, by mail to the
Office of Exemption Determinations, Pension and Welfare Benefits
Administration, Room N-5649, U.S. Department of Labor, 200 Constitution
Ave., N.W., Washington, D.C. 20210, Attention: Exemption Application
Numbers D-11137-39, or by electronic mail to moffittb@pwba.dol.gov. |
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Copies of the proposed individual exemption will be
available on PWBA’s Web site at www.dol.gov/pwba.
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U.S. Department of Labor
news releases are accessible on the Internet. The information in this news
release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing
your request. Call 202.693.7773 or TTY 202.693.7755. |
