Administration November 12, 2002

Company Stock Holdings Fading in UAL Accounts

December 11, 2002 (PLANSPONSOR.com) - United Airlines employees no longer hold any UAL stock in their 401(k) plans, and the 55% stake they once held in the airline through an ESOP plan is also shrinking, according to a report in the San Francisco Chronicle.

Reported by

Fred Schneyer

According to the report, Aon Fiduciary Counselors, the independent fiduciary recently hired to protect 401(k) plan participants, sold all the UAL stock held by the plans before the company filed for bankruptcy, citing Nell Hennessy, president of the Aon unit.

At one point UAL employees owned roughly 12.5 million shares, or about 12% of UAL’s stock, in their 401(k) plans. The stock sales raised between $25 million and $30 million, according to the Chronicle.

Until recently, UAL employees (excluding flight attendants) owned an additional 55% of UAL’s stock through their employee stock ownership plan, or ESOP. But the recently hired fiduciary for the ESOP, State Street Bank & Trust, has also been selling those shares, the Chronicle reported.

On Monday, State Street said in a filing that it would sell up to 28.3 million additional common UAL shares from the ESOP, on top of 11 million common shares it filed to sell last fall.

Aon, State Street Hired as Fiduciaries

In September, United hired Aon to be an independent fiduciary for company stock in 401(k) plans. At the same time, the employee-management committee that oversees the ESOP hired State Street as fiduciary. Before that, the company was the fiduciary for the 401(k) plans and an ESOP committee of management and labor representatives was the fiduciary for the ESOP.

In late September, shortly after it was hired, State Street revealed that it would sell up 11 million shares from the ESOP and Aon said it would sell up to 10.6 million shares from the 401(k) plans.

At that time, UAL stock had already fallen to $2.36 per share. In early November, when it looked as if bankruptcy might be averted, the unions representing United pilots and machinists called on the fiduciaries to halt the stock sales.

Fiduciaries must file a form with the Securities and Exchange Commission when they intend to sell stock, but Aon mailed in its last filing on Thursday, so it had still not been made public as of Tuesday.

Hennessy says Aon informed management and union representatives of the plan. Aon wanted to keep the final stock sales quiet so it did not depress the market price any further.