With the contribution to the Delta Retirement Plan, the Atlanta-based airline has exceeded the minimum required contribution for the calendar year, bringing total 2003 contributions to $325 million. The company does not anticipate making any additional contributions to that plan during the remainder of 2004, but plans to contribute approximately $115 million to the Delta Pilots Retirement Plan, bringing total pension plan contributions to approximately $440 million for the year, according to a news release.
Delta has voluntarily prefunded the Delta Retirement Plan for the second consecutive year, a decision the air carrier said it made “in order to provide greater assets for payment of participant benefits and investment return, thus potentially providing an added level of security to the benefits already earned by plan participants.” In March 2003, Delta prefunded the Delta Retirement Plan with a contribution of $76 million.
“Delta’s decision to voluntarily prefund the Delta Retirement Plan this year, as we did last year, also provides the company with more level plan contribution requirements in the near term,” M. Michele Burns, the company’s executive vice president and CFO said in the release.
Delta also announced plans to meet minimum funding requirements in 2004 for the Delta Pilots Retirement Plan, which is determined separately from the Delta Retirement Plan. Both the Delta Pilots Retirement Plan and the Delta Retirement Plan were funded to at least 80% for ERISA current liability purposes as of July 1, 2003.
In addition to announcing the latest contributions, Burns took the opportunity to lobby for a deficit-reduction contribution (DRC) holiday. “Delta’s decision to prefund the Delta Retirement Plan does not, however, lessen the need for Congress to promptly enact needed pension funding and interest rate relief as contained in pending legislation,” the CFO said in the news release.
Specifically, Burns was speaking to the Pension Stability Act that has received approval from both bodies of Congress, with one glaring exception (see Senate Passes Pension Funding Bill ). While the Senate version contains the controversial DRC provisions – a provision that would offer companies with severely underfunded pension plans a two-year reprieve from the stringent funding provisions under the DRC (see PBGC Calls Out DRC Modifications ). The US House of Representatives passed a similar relief bill last October – by an overwhelming 397-to-2 margin – without the controversial DRC bailout provision (see US House Solidly Approves Pension Funding Bill ). Both sides have yet to reach a compromise on the issue and the White House has threatened veto is the DRC relaxation provisions are attached.
Even with staunch opposition from President Bush and the nation’s private pension fund insurer, the US Pension Benefit Guaranty Corporation (PBGC),Fitch Ratings has came out and said a relaxation on the rules is necessary to “help ease airline liquidity pressures.” Fitch estimated that the largest US air carriers collectively face an unfunded pension liability of more than $20 billion (see Fitch: Pension Bills Could be Big Help for Airlines ).