1. What is the multiplier that is currently used to calculate my pension benefit and what is the multiplier that United is proposing to use in the future?
The current multiplier is 2.2669 which is applied to your entire career earnings. United’s proposed multiplier is 1.3, which would be applied to the average of the highest 60 consecutive months earnings out of 10 years, times years of service, capping at 30 years. In each case, your pension benefit would be reduced by 3% for each year prior to the full retirement age. Currently, full retirement with no reduction is age 60. United has proposed to change retirement with no reduction to age 62.
2. According to the company’s proposal, should I retire before I lose benefits through a change to the pension plan?
Your benefit earned to the date of a contract change would be “frozen,” based on the old formula. The new proposed multiplier would go into effect going forward. When you retire, the “frozen” benefit is compared to what you have accrued under the new formula going forward from the date of change, and you are paid the greater of the two. Approximately 85% of the Flight Attendants currently on the United system seniority list would not accrue anything greater than the “frozen” amount. The benefit that is accrued and “frozen” cannot be reduced by United. If the Pension Benefit Guaranty Corporation (PBGC) takes over the plan, your benefit may be reduced to the monthly maximum allowed by the PBGC. (see also: PBGC Q & A – Benefit Guarantys)
3. If United is successful in raising the full retirement age to the proposed age 62 from age 60, should I retire at age 59 before any modifications, or should I wait until I turn age 60 regardless?
As we said in the previous question, your pension benefit would be “frozen” using the old multiplier on the day of a change to a new retirement plan. It is extremely unlikely that any accrual going forward would increase that “frozen” benefit on the day that you actually retire. If you retire before any modifications to the plan, at age 59, then your pension benefit will be reduced by 3% for the one year in age before the retirement age with no reduction from age 60.
4. Are the early retirement factors (e.g., 3% reduction from age 60) protected under the company’s proposed new formula?
Yes. When the frozen benefit would be calculated, the early retirement factors in effect before the change would be used in calculating the protected frozen benefit at early retirement. The new proposed early retirement factors would be used only for that portion of the benefit that exceeds the frozen benefit. The following is an example of how the early retirement factors are protected.
Hypothetical Example:
Mary Mainliner’s Flight Attendant seniority date is January 1, 1981 and she is 59. On November 30, 2003 she will turn 60. May 1, 2003 the pension multiplier changes from 2.2669 to 1.3 and the retirement age with no reduction changes from 60 to 62. If Mary is still an active Flight Attendant on May 1, 2003 then her full retirement benefit is calculated according to the total earnings and years of service already accrued, and that calculated benefit is “frozen.” If Mary retires on April 30, 2003, at age 59, the calculated full retirement benefit is reduced by 3% since she is one year shy of the retirement age with no reduction (60).
If Mary chooses to wait and retire on November 30, 2003, at age 60, then the “frozen” benefit would be compared to what she accrued under the new formula going forward from the new plan effective date, and the greater of the two would be her pension benefit. Unfortunately, under the new multiplier, Mary would not even come close to exceeding the “frozen” amount, so her pension would be the “frozen” benefit. However, there would be no 3% reduction as she has attained age 60. Under the current plan, there is no reduction after reaching age 60.
5. I am 53 and I enjoy my job. I want to keep working for a few more years, but I am concerned about United’s proposed changes to our Contract and how that could affect my pension. What should I do?
This is a decision that only you can make once we have all of the definitive information. Remember that everything we discuss here is hypothetical since it is subject to negotiations. As discussed in previous answers, if United is successful in achieving the proposed changes to our Contract, then your pension benefit would be calculated under our current Contract and “frozen.” Going forward, working under the new calculation would not produce any greater pension benefit. Therefore, if you continue to work beyond the new effective date, you would be working strictly for wages and enjoyment of your job. You would most likely not be increasing your retirement benefit.
United’s proposal regarding medical expects active employees to pay 20% of the premium for medical and dental, and 50% if you are retired and less than 65. After 65, when Medicare starts, they want the retiree to pay 100% of the premium. These percentages would also be for the family coverage. There would be no cap for employee contribution contemplated in their proposal and as medical premiums continue to rise, so would our contribution. Additionally, United has proposed decreased medical benefits. United’s proposed retiree premium costs are for prospective retirees only.
6. Will Flight Attendants be given any notice if our pension plan is changed through negotiations or the court?
The company must give 45 day notice of significant changes to a pension plan. ERISA Section 204(h) and proposed regulations issued there under (67 Federal Regulation 19713 – April 23, 2002) require notice of a plan amendment that significantly reduce the rate of future benefit accruals or that significantly reduces an early retirement benefit or retirement-type subsidy. The plan administrator must provide the notice by letter to each plan participant 45 days before the amendment’s effective date.
7. I read in 'Money Magazine' that the UAL Pension Plan is funded at 75%. Is this correct and can we expect to receive just 75% of our pension amount if we retire soon?
The Money Magazine article is lumping together each of the pension plans at UAL. The Flight Attendant pension plan is funded to legal minimum levels. Each employee plan is in a different state of funding, and it varies depending upon the investments of the plan. Nevertheless, it does not mean the participants will only receive 75% of their benefit. Every employee is entitled to the benefit earned. When you retire, that will be the benefit you receive. If the plan is unable to pay out the promised benefit, the PBGC will most likely terminate the plan, and assume administration of the plan. The PBGC guarantees your benefit, but only up to a monthly maximum as defined in the year the plan is terminated.
8. Do retirees retain Prescription Benefits?
Our retirement benefits provide that retirees do have access to the Mail Order Drug Program. United has proposed changes to the plan, particularly higher costs, but the proposal does not suggest that the plan go away altogether.
9. If United were to liquidate, does it matter when I retire?
If United liquidates, it does not make any difference when you retire. Your pension will be guaranteed by the PBGC, up to the monthly maximum according to your age and the year in which the plan is terminated due to the liquidation. You will receive your full retirement payment or the PBGC maximum, whichever is less.
10. If United files Chapter 7 are medical benefits in effect if one has retired before the Chapter 7 filing?
In the event United files for Chapter 7, there is no retiree medical provided by United Airlines since the company would be liquidated. It would not make any difference whether retiring before or after a Chapter 7 filing.
Processing My Pension
11. How long should I expect United Pension Department to take in returning a pension benefit estimate (PBE)?
Due to the extraordinary volume of estimate requests, the United Pension Department is splitting requests into two categories:
- Requests for estimates with Annuity Start Date (ASD) 60 days or less into the future are generally handled within 1 to 2 weeks of receipt.
- Requests for estimates with the ASD more than 60 days in the future are constantly being reviewed and reprioritized as the requested ASD approaches.
12. What is an Annuity Start Date (ASD)?
Annuity Start Date (ASD) is the day that you start to receive your pension benefit. This day is the first day of the month following the retirement date.
13. How long should I expect United Pension Department to take in returning retirement packages?
Retirement packages cannot be requested more than 90 days before the requested Annuity Start Date (ASD), but must be requested with sufficient advance notice (at least 30 days before the ASD) in order to allow the Pension Department to generate and mail the retirement package before the ASD. While the Pension Department makes every effort to issue package requests received in less than 30 days, if the request is not received in enough time to allow processing by the requested ASD, the earliest benefit start date may be the first day of the month following the termination of employment. In other words, your ASD may not start until the month following your retirement.
Retirement packages are processed in ASD order, with priority given to the package requests for the closest ASD. While the Pension Department will continue to work on packages with an ASD that is 2 or 3 months in the future, the department places a greater priority on requests placed for an ASD only 1 month away – regardless of the order in which the requests were received.
14. How long will it take to process my retirement papers?
In terms of processing time, after the ASD, or from receipt of all properly completed paperwork, the retirement package states that it normally takes as much as 5 to 7 weeks for the benefit payments to start. The Pension Department estimates that given the current volumes, getting the initial payment started may take as long as 6 to 8 weeks from the ASD, or receipt of all properly completed paperwork, which ever is later. Employees have up to 45 days after their ASD to get properly completed forms to the Pension Department, but processing cannot be finalized until the Pension Department receives all of the retirement paperwork. Delay of returning this paperwork may cause a further delay in receiving your initial pension payment.
15. Is there a number I may call to ask further questions about the retirement process?
Flight Attendant Service Center -- 1-800-FLT-LINE
Pension Department Call Center -- 1-800-482-5236, option 4
16. Assuming I meet all of the retirement qualifications, can I retire tomorrow?
Your retirement is effective the date you are separated as an employee, which can be accomplished in a day by calling the Service Center and stating that you would like to retire. You may then proceed to get your pension benefits by calling the Benefits Center for your retirement papers, which may take up to 30 days. It’s important to understand that in this scenario, it’s possible that you may not receive your first pension payment for 3 or 4 months beyond the day that you retired.
PBGC Q & A -- Benefit Guarantys
(This Q&A is a reprint from the PBGC website, www.pbgc.gov.)
Q. What is the Pension Benefit Guaranty Corporation (PBGC)?
A. PBGC is a federal agency created by the Employee Retirement Income Security Act of 1974 (ERISA) to insure and protect pension benefits in private traditional pension plans known as defined benefit plans. If your plan ends without sufficient money to pay all benefits, PBGC's insurance program will pay you a benefit. Our financing comes mainly from insurance premiums paid by companies whose plans we protect, not from taxes. Your plan is insured even if your employer fails to pay the required premiums.
Q. What types of plans are insured by PBGC?
A. PBGC insures defined benefit plans, the type that promise to pay a specific monthly benefit at retirement. PBGC does not insure retirement plans that do not promise specific benefit amounts ("defined contribution pension plans"), such as profit sharing or 401(k) plans.
Q. Why do pension plans end?
A. Pension plans usually end for one of three reasons: (1) the employer is having financial problems and can no longer support the plan; (2) the plan has enough money to pay all promised benefits and the employer wants to end the pension plan; or (3) the plan does not have enough funds to pay participants and PBGC decides that it should be ended in order to protect the interests of participants or the PBGC insurance program.
Q. How do pension plans end?
A. Employers can end (terminate) pension plans in one of two ways.
In a standard termination, an employer ends a fully funded plan after showing PBGC that there is enough money to pay all benefits. The plan will provide the benefits owed either by purchasing an annuity from an insurance company which will provide periodic payments for life or, if your plan allows, all at once in a lump-sum. (The United Flight Attendant plan does not allow for lump sum payments, unless the total benefit is $5000.00 or less). Your plan administrator must tell you what insurance company or companies your plan is considering as a possible annuity provider before making a final selection. PBGC's guarantee ends when the employer purchases the annuities or otherwise pays you the value of your pension.
In a distress termination, an employer ends a plan that does not have enough money to pay all benefits owed. To do so, however, the employer must prove to PBGC that the business is financially unable to support the plan. PBGC takes over the plan as trustee and uses its own assets and any remaining assets in the plan to make sure that current and future retirees receive their pension benefits, within the legal limits.
Under certain conditions, PBGC may terminate a pension plan, on its own initiative. PBGC can take such action if, for example, a plan does not have sufficient assets to pay benefits currently due.
Q. How will I know if my pension plan is ending?
A. If your employer wants to end the plan, your plan administrator must notify you in writing that your plan is ending at least 60 days before the "termination" date. This notice is called the Notice of Intent to Terminate. If PBGC is terminating the plan, we notify the plan administrator and often publish a notice about our action in local and national newspapers.
Q. What other information should I receive?
A. In a standard termination, you should receive a second letter, called the Notice of Plan Benefits, describing the benefits you will receive.
In a distress termination, the plan administrator will send PBGC information about your benefits. We will figure the amount of your benefit that is guaranteed and inform you of it in writing.
Q. Can I earn additional benefits after my plan ends?
A. No. After the plan ends, you cannot earn additional benefits.
Q. What happens when PBGC takes over my plan?
A. PBGC reviews your plan's records to determine what benefits each person will receive.
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If you are already retired and receiving benefits, we will continue paying you without interruption during our review. These payments will be an estimate of the benefits that PBGC can pay under the insurance program, and they may be less than you were receiving from your plan.
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If you have not yet retired, we will pay you an estimated benefit when you become eligible.
Once we complete our review, we will tell you in writing what your pension amount will be and what rights you have to appeal our decision.
The pension benefit PBGC pays depends on (1) provisions of your plan, (2) legal limits, (3) the form of your benefit, (4) your age, and (5) amounts PBGC recovers from employers for plan underfunding.
To ensure PBGC has the proper information for all participants, we will contact you periodically to request any changes, such as your new address if you have moved.
Q. What happens if PBGC's estimate is too high or too low?
A. If PBGC underpaid your benefit, we will make it up in a single payment with interest when we have completed our calculations. If we overpaid you, we will reduce future payments until the overpayment has been repaid. The reduction is no more than 10 percent of each payment. If both overpayments and underpayments were made, we will calculate the net overpayment or underpayment.
Q. What is the maximum amount that PBGC can guarantee?
A. PBGC's maximum benefit guarantee is set each year under provisions of ERISA. For pension plans ending in 2002, for example, the maximum guaranteed amount is $3,579.55 per month ($42,954.60 per year) for a worker who retires at age 65. This guarantee is lower if you begin receiving payments before age 65 or if your pension includes benefits for a survivor or other beneficiary. The table at the end of this booklet shows PBGC's maximum guarantee for retirement at various ages.
Q. What benefits does PBGC guarantee?
A. PBGC guarantees "basic benefits," which include (1) pension benefits at normal retirement age, (2) most early retirement benefits, (3) disability benefits for disabilities that occurred before the plan was terminated (for terminations started after December 7, 1994, the reduced maximum guarantee for ages younger than 65 does not affect the benefits received by disabled participants who receive a disability benefit from both the pension plan and Social Security), and (4) certain benefits for survivors of plan participants. PBGC does not guarantee health care, vacation pay, or severance pay.
Q. Are there other limits on PBGC's guarantee?
A. Yes. For example, if your plan was created or amended to increase benefits within five years before it ended, your benefit may not be fully guaranteed. Generally, the larger of 20% or $20 per month of the benefit is guaranteed for each full year the benefit was in effect.
Q. Does PBGC pay survivor benefits?
A. PBGC pays survivor benefits if you retired before your plan ended and your benefit included a survivor benefit, or if you were receiving a survivor benefit before the plan ended. If you are married and begin receiving retirement benefits after the plan ends, unless you and your spouse tell us in writing to do otherwise, we will pay you the benefit during your life, and then pay your surviving spouse a reduced amount. To pay for the cost of the survivor benefit, your monthly benefit is reduced during your lifetime.
If you are married and not yet retired, PBGC will provide a benefit to your spouse if you die before you retire. Your spouse would start receiving this benefit as early as the earliest date your plan states you can retire.
Q. Can I receive my benefit from PBGC in a lump sum or as a monthly annuity?
A. Normally, we pay benefits in monthly payments for life. But, if the monthly benefit is $50 or less, we generally pay on a yearly basis. If the total value of the benefit is $5,000 or less, you will receive a single, lump-sum payment. However, if the benefit is at least $25 a month, you can receive it in monthly payments if you prefer.
Q. Can I put my lump sum into an Individual Retirement Account (IRA)?
A. Yes. If the taxable portion of your lump-sum payment is transferred directly by the plan or PBGC into an IRA, you will not have to pay taxes on your benefit until you begin receiving IRA payments. This deposit is called a "tax-free rollover." For more information about tax-free rollovers and the laws controlling IRAs, call 1-800-TAX-FORM or write the Internal Revenue Service office nearest you.
Q. Will PBGC adjust my pension yearly for inflation?
A. No, there is no cost-of-living adjustment. Your benefit is fixed as of the date your plan ended.
Q. Will my deductions stay the same if PBGC takes over my plan?
A. PBGC only deducts federal income taxes. You will have to pay separately the state taxes and other amounts now being deducted.
Q. If I have other questions about PBGC, how can I find the answers?
A. If you have questions about a pension plan that PBGC has taken over or about our insurance programs and retirement guarantees, contact PBGC's Technical Assistance Branch at 1200 K Street, N.W., Suite 930, Washington, DC 20005-4026, or call us at (202) 326-4000 (not a toll-free number). For TTY/TDD users, call the federal relay service toll-free at 1-800-877-8339 and ask to be connected to (202) 326-4000. If you have specific questions about your plan or your benefits, you should first contact your plan administrator or your employer.
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PBGC MAXIMUM MONTHLY GUARANTEES
Examples of the maximum guarantee for a single life annuity with no survivor benefits are shown for retirement at ages 65, 62, 60 or 55. The maximum is lower if the benefit is paid in a form other than for a single life annuity, such as a form that provides for survivor benefits. The pension benefit that PBGC can pay will depend on your age, the provisions of your plan, the form of your benefit, the legal limits on what PBGC can guarantee, and amounts PBGC recovers from employers for plan underfunding.
| Year Plan Terminated |
Monthly Guarantee Limit At Age 65 |
Monthly Guarantee Limit At Age 62 |
Monthly Guarantee Limit At Age 60 |
Monthly Guarantee Limit At Age 55 |
| 2003 |
$3,664.77 |
$2,895.17 |
$2,382.10 |
$1,649.15 |
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