NW Airlines Seeks OK for Stock Contribution to Pensions

January 16, 2003 (PLANSPONSOR.com) - Federal officials have proposed allowing Northwest Airlines to contribute stock of a regional affiliate airline to its pension plans instead of cash.

The US Department of Labor’s Pension and Welfare Benefits Administration (PWBA) said it was proposing to exempt the air carrier from ERISA rules against in-kind pension contributions. The labor officials said Northwest had asked for permission to contribute stock of Pinnacle Airlines to its three pension plans that cover 72,754 employees nationwide. The plans now have a combined $4.39 billion in assets.

The PWBA said a decision to grant the exemption is designed to allow Northwest to meet its long-term pension plan funding obligations while maintaining its financial liquidity.

The proposed exemption would permit:

  • in-kind contribution of shares of Pinnacle Airlines stock to the defined benefit plans to satisfy all or part of Northwest’s minimum funding requirements
  • holding of the stock by the plans
  • the sale of the stock by the plans to Northwest
  • acquisition and exercise by the plans of a put option granted by Northwest.

Officials said they would consider such exemptions when the value of the contributed assets can be independently determined and the plan receives actual ownership rights to those assets.  

The proposal comes as airline analysts predict widespread pension funding problems throughout the beleaguered airline industry that has suffered mightily since the 9/11 terror attacks (See  Fitch: Airlines’ Pension Picture ‘Most Dire’ ).