Northwest Pilots OK DB Plan Freeze

January 12, 2006 ( - As Northwest Airlines continues its efforts to emerge from US Bankruptcy Court protection, the carrier's pilots have agreed overwhelmingly with a proposal to freeze their defined benefit plan and move to a defined contribution program.

A report posted on the pilots’ Web site indicated that the issue garnered 2,851 or 81.53% of votes in favor and 646 or 18.47% of the votes opposed.

As a result, the NWA Pilots Defined Benefit Pension Plan will be frozen as of January 1, 2006 and the proposed DC plan with an interim 5% company match kicks off the following day (See NWA Pilots to Propose DB-DC Switch ). According to the pilots report, the agreement also includes a new Long-Term Disability program and a new Family Member Benefit program.

The pilot’s report said that Northwest agreed that the 5% company contribution would only be in place until a new rate is established through labor-management negotiations. The company match would not begin until the company emerges from Chapter 11.

The airline is still negotiating other concessions from pilots, as well as flight attendants and ground workers. If no deal is made Northwest will ask a bankruptcy court judge for permission to reject its union contracts at a trial set to begin January 17. The unions for all three groups have said they may strike if that happens.

The changes at Northwest Airlines are part of an industry trend finding many employees freezing DB accruals and moving workers into a defined contribution program. Among the recent examples are Milliken & Co. (See Textile Giant Announces Pension Plan Freeze ) and IBM ( IBM Beefs Up 401(k), Backs Off DB – Come 2008 ).