The airline will pay $14 million in premiums and the private pension insurer will release Northwest from liens on its assets.
The settlement does not, however, relieve Northwest of the burden of its underfunded pension plans, which amounted to a shortfall of $5.7 billion when the company filed for bankruptcy protection in September 2005.
The Minnesota-based company was among the strongest backers of a measure in the Pension Protection Act of 2006 that would give the airlines more time to fund their plans, arguing that it would be forced to terminate its plans if it weren’t given more time ( See Bankrupt Northwest Asks Congress to Speed Up Aid Legislation ).
The airline industry later won thevictory in September when the final bill included a provision that gave the airlines 10 years to meet funding requirements (See What’s Inside the Pension Protection Act ).
Northwest moved to freeze two of its pension plans that cover salaried employees in September 2005 (See Northwest Airlines Freezes Pension Plans ), but engaged in an ongoing struggle with pilots over the freezing of their plans (See Northwest Pilots OK DB Plan Freeze ).
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