Date: This exemption is effective as of January 15, 2003. United pilots' pension was terminated in its 2002 bankruptcy and taken over by the pension oversight agency. (j) A description of all of the factors taken into account in making the valuation, including any restrictions, understandings, agreements or obligations limiting the Plans' ability to dispose of the stock. According to the IF Report, Eclat estimates that Pinnacle's value to the Northwest domestic system is between $520 million and $540 million annually as the carrier exists today. Southwest has a small operation in Detroit with only 2 gates. WebMore information about DELTA AIR LINES, INC.. Form 5500 Filing Information Submission information for form 5500 for 401k plan NORTHWEST AIRLINES PENSION PLAN FOR CONTRACT EMPLOYEES None of the named plaintiffs is a participant in the Northwest Airlines Pension Plan for Salaried Employees, although they bring this action on behalf of participants in that plan as well. The third expert then determines which of the two assessed values should be assigned to such non-cash consideration. Federal Register. As a condition to any such contribution by Northwest, the Independent Fiduciary must determine on behalf of the Plans that the acceptance of the contributed shares is prudent and in the interests of the Plans' participants and beneficiaries and otherwise consistent with the fiduciary standards of ERISA. 1. Finally, Fiduciary Counselors requests that in Section III. Northwest notes that the Omnibus Agreement, while consistent with the Term Sheet, provides specific terms for: the contribution transactions; transferability of Pinnacle Stock; corporate governance; voting rights; the Put Option; representations and warranties; and a number of other matters. Reliance solely on the valuation provided by the appraiser would not be sufficient to meet this prudence requirement. For a complete statement of the facts and representations supporting the Department's decision to grant this exemption, refer to the January 17, 2003 Notice of Proposed Exemption at 68 FR 2578. ?fTXQkb~}9M =: At the present time, the Board was unable to make this finding. These guidelines contemplate that a certain amount of assets will be allocated to securities with risk and return characteristics similar to Pinnacle Stock. documents in the last year, 37 Such techniques were employed by Fiduciary Counselors and Eclat in this circumstance. by the Education Department The value of the transaction is enhanced due to the downside protection that this Put Option provides. The Plans will be granted a Put Option with respect to each share of Pinnacle Stock contributed to the Plans, which may be exercised by the Independent Fiduciary at any time. The stock has long term upside potential because of the planned IPO. The concerns expressed generally related to the proposed contribution of Pinnacle Stock instead of a cash contribution to the Plans; the value and method of valuation of the Pinnacle Stock; the effects of the proposed transactions on the Plans; and the adequacy of the proposed safeguards that are intended to protect the Plans' interests. In addition, the Independent Fiduciary negotiated the right to engage an investment banker on behalf of the Plans in an IPO, at Northwest's expense. The valuation prepared by Eclat took into consideration current industry conditions. A federal judge has denied dismissal of a lawsuit in which five former employees of Delta Air Lines allege Delta and its administrative committee improperly Accordingly, this final exemption is issued solely by the Department. The ASA provides a range of revenues to be paid by Northwest to Pinnacle, and Eclat valued the Company based on the minimum revenues, which would result from the ASA. Fiduciary Counselors stated that Eclat's valuation took into account a variety of financial data. daily Federal Register on FederalRegister.gov will remain an unofficial the material on FederalRegister.gov is accurately displayed, consistent with Once the Plans hold more than 50 percent of the Pinnacle Stock, the affirmative vote of the director designated by the Plans shall be required to approve the appointment of any new CEO of Pinnacle and compensation of any CEO, any amendments to the $200 million Note of Pinnacle Airlines, Inc. held by Northwest, the amendment of Pinnacle's charter or by-laws in certain respects, or the implementation of certain changes in Pinnacle's capital structure or the issuance of capital stock prior to an IPO. Northwest asserts that, while the Department has required collateral for some similar exemptions in the past, it has not required collateral in all cases. Moreover, when the IPO of Pinnacle Stock occurs, the Plans may benefit from a potentially significant IPO premium with respect to their holdings of Pinnacle Stock. 2007) Argued and Submitted September Form Answers. Northwest will no longer guarantee a minimum operating margin in 2008. In response to the commenters' concerns about the role of the independent fiduciary, the Department believes that it would be helpful to provide its views on the responsibilities of an independent fiduciary in connection with the in-kind contribution of property to an employee benefit plan. For complete information about, and access to, our official publications There will be no change in their personnel assigned to this engagement or in the manner in which the fees are split between the two organizations. dog off leash ticket california; Income Tax. The Term Sheet originally placed the right to request this fairness opinion solely on the Plans' director, who asked that this duty be placed on the independent directors of which the Plans' director is a member. In determining the fair market value of the stock, the Independent Fiduciary must obtain an appraisal by a qualified independent appraiser, and must ensure that the appraisal is consistent with sound principles of valuation. Northwest states, as noted in the Proposed Exemption, that the Master Trust is established in a manner such that all Plans hold an undivided and commingled interest in the assets of the Trust. The Public Inspection page In accordance with section 408(a) of the Act and section 4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon the entire record, the Department finds that the exemption is: (b) In the interests of the plans and their participants and beneficiaries; and. 5,105. Comment: Some comments suggested that Northwest be required to post collateral in order to contribute Pinnacle Stock to the Plans. Maintaining liquidity is key to Northwest's strategy for avoiding bankruptcy. publication in the future. WebRecourse obligation of north carolina; northwest airlines pension plan for contract employees get this defense? On February 14, 2003, Northwest obtained formal written confirmation from the bank lenders that none of the rights afforded to the Plans in the Omnibus Agreement nor the exercise of such rights would violate the Credit Agreement. Here, they assert, the purpose of the exemption, to provide the Plans with a valuable security while maintaining Northwest's liquidity, would be undermined if assets were required to be used as collateral in connection with contributions of Pinnacle Stock. As of December 31, 2002, 4.3 million shares of Series C Preferred Stock have been converted into Common Stock and the remaining Start Printed Page 498044.8 million shares outstanding are convertible into 6.6 million shares of Common Stock. As with the Term Sheet, the final Omnibus Agreement provides that the Deferral shall be shortened if Pinnacle Stock is publicly traded. The Pension Investment Committee informed the Independent Fiduciary that the holding of Pinnacle Stock constituting the Initial Contribution to the Plans would not and was not expected in the foreseeable future to impair the liquidity of the Plans and that the Plans would be able to pay benefits and expenses when due. # A1430. As Pinnacle grows to 95 aircraft, the number of passengers and revenue will more than double. As described in the Fiduciary Counselors letter to the Department on January 6, 2003, Northwest has agreed to pay Fiduciary Counselors an annual fee that covers both the independent fiduciary and investment management services provided by Fiduciary Counselors and the investment advisory services provided by AIC. A total of 9.1 million shares of Series C Preferred Stock were contributed to the Employee Stock Plan. The Proposed Exemption included specific conditions that ensure that the independent fiduciary is free from conflicts of interest. The Series C Preferred Stock ranks senior to Common Stock with respect to liquidation and certain dividend rights. does steven weber have a brother; charlie bears lantern; My Cart. The Plan is a defined benefit pension plan for the benefit of certain union-represented employees. (c) A statement that the appraisal is being conducted to determine the fair market value of Pinnacle Stock, which is defined as the price at which the stock would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, and both parties are able, as well as willing, to trade and are well informed about the stock and the market for the stock. On that day, ALPA, TWUA, NAMA, ATSA and the Company on behalf of its management and non-contract employees exercised the Special Conversion Option, with the IAM and IBT electing not to exercise the Special Conversion Option (63 shares are still owned by the ALPA trust). This additional contribution was agreed upon as a result of a technical concern raised by Fiduciary Counselors regarding covenants in Northwest's $1.125 billion Credit and Guarantee Agreement dated October 24, 2000, as amended under which Northwest is the borrower (the Credit Agreement), with Northwest's bank lenders. 7. The Additional Initial Contribution served to provide the Plans with added protection until Northwest obtained written assurances from the bank lenders that the Put Option does not violate the Credit Agreement. establishing the XML-based Federal Register as an ACFR-sanctioned In contrast, under its new ownership, neither Fiduciary Counselors nor any affiliate will accept any other engagement from Northwest while it is independent fiduciary for the Plans. WebHistorically, the Named Executive Officers participated in three defined benefit pension plans the Northwest Airlines Pension Plan for Salaried Employees (the Salaried Total number of active participants reported on line 7a of the Form 5500. The Public Inspection page may also This, together with the reporting planned by Fiduciary Counselors, will permit ALPA to monitor the Independent Fiduciary. Northwest stated that it would not. After that date, the Omnibus Agreement provides Fiduciary Counselors with the right to cause an IPO of Pinnacle Stock. Wendy M. McColough of the Office of Exemption Determinations, Employee Benefits Security Administration, U.S. Department of Labor, telephone (202) 693-8540. The IF Report states that Eclat's clients come from almost every sector of the aviation industryairports, airlines, labor organizations and aerospace/aeronautics corporations. Fiduciary Counselors, AIC and Eclat represent that the ASA between Northwest and Pinnacle provided the framework for the final valuation. Northwest strongly believes that Pinnacle Stock has significant value and that the value of Pinnacle Stock will increase when the IPO market improves for regional airlines. If the Pinnacle Stock is not publicly traded, the Plans will receive the. These modifications and the major comments are discussed below. electronic version on GPOs govinfo.gov. If you are eligible, the Plan can provide a benefit toyou when you retire and even continue a benefit to yourspouse or However, because of its liquidity needs, a cash contribution is not a viable alternative. New Documents The Term Sheet did not provide for the Additional Initial Contribution. 4 of 1978 (5 U.S.C. Fiduciary Counselors' duties also include the discretionary authority to manage the Pinnacle Stock as investment manager. Eclat used the Black-Scholes option-pricing model to determine the value of the Put Option. Participants and beneficiaries of the Plans benefit from Northwest's improved liquidity and continued viability and competitiveness in the current economic environment. This is primarily due to the fact that Southwest Airlines does not serve 2 of the 3 Northwest hubsMemphis (Pinnacle's largest market) and Minneapolis. Northwest observed that the comments submitted to the Department raised several concerns regarding the contribution of Pinnacle Stock to the Plans, as contemplated by the Proposed Exemption. Northwest Airlines Pension Plan For Contract Employees. Fiduciary Counselors and Eclat represent that Eclat was originally retained by PBGC to value Pinnacle and to evaluate the financial viability of Northwest. In 1994 through 1997, Northwest made annual contributions of Series C Preferred Stock to the Employee Stock Plan for the benefit of employees represented by the IAM and IBT (the other labor groups had converted their right to receive Series C Preferred Stock into Common Stock under the Special Conversion Option described below). In its determinations, the Independent Fiduciary has also taken into account Northwest's request for a minimum funding waiver with respect to Plan contributions in 2003 and 2004, and considered the likelihood that such waiver will be granted. A comprehensive set of representations and warranties relating to both Pinnacle, Northwest and its affiliates. Eclat provided additional information in support of its view that the discount rates, and other factors used in determining the fair market value of the Pinnacle Stock were reasonable and theoretically sound. Regional airlines play an indispensable role in providing major airlines with important access to passengers, largely from markets too small to be serviced by a major airline. Additionally, by letter dated July 15, 2003, Fiduciary Counselors represents that in preparing the valuation for subsequent contributions, Eclat will reexamine the assumptions used in preparing the initial valuation and will continue to stress test the assumptions in its valuation model to reflect the credit-worthiness of Northwest and changing conditions in the regional jet market. Northwest notes that the board previously approved the Omnibus Agreement, which includes the Put Option, and no further action would be required of the board in the event that the Put Option is exercised by the Independent Fiduciary. In this environment, it is necessary to maintain high liquidity reserves to ensure the viability of the airline and protect the long-term interests of the pension plans and plan participants. omakase strawberry seeds; marion county impact fees 2021; githens middle school yearbook WebNWA works closely with plan sponsors and their professional advisors to establish and/or maintain customized retirement programs for both defined benefit and defined contribution plans. As a result of its review, certain changes were incorporated in the new Airline Services Agreement entered into on January 14, 2003 (ASA). The Employee Stock Plan covers in general terms Northwest's employees employed from August 1, 1993 through 1996, including employees represented by Air Line Pilots Association (ALPA), International Association of Machinists and Aerospace Workers (IAM), International Brotherhood of Teamsters (IBT), Airline Technical Support Association (ATSA), Northwest Airlines Meteorologists Association (NAMA), Transport Workers Union of America (TWUA) and management employees. case no. Northwest and ALPA assert that the voluntary contribution gives Northwest the liquidity it needs, and thereby the ability to maintain all of its Plans, by eliminating the funding requirement for the Pilot Plan for the 2003 Plan Year, possibly reducing the funding requirements for future plan years, and by waiving the monthly contribution requirement under the pilot collective bargaining agreement for the 2004 and 2005 Plan Years. For purposes of the funding standard account of each Plan, the value of the shares of Pinnacle Stock contributed to each Plan will be determined by the Independent Fiduciary. 5. Archived News Release Caution: Information may be out of date. On July 11, 2003, Fiduciary Counselors informed the Department that Fiduciary Counselors Inc. (formerly Aon Fiduciary Counselors, Inc.) (Fiduciary Counselors) is no longer a subsidiary of Aon Corporation. Minnesota law would not restrict the repurchase of Pinnacle stock by Northwest, a Minnesota corporation, which issued the Put Option. In valuing Pinnacle Stock, the Independent Fiduciary specifically applied a 15% liquidity discount and a 5% discount to take into account that, for some period, the Plans would be a minority shareholder. These markup elements allow the user to see how the document follows the Similarly, U.S. Airways did not reject its ASA with its regional airline partners Mesa and Chautauqua. 04-56719. Legal News. documents in the last year. 04/28/2023, 244 A federal judge has denied dismissal of a lawsuit in which five former employees of Delta Air Lines allege Delta and its administrative committee improperly If NWA Corp. decides not to repurchase the Series C Preferred Stock, quarterly dividends will accrue beginning August 1, 2003, at 12% per annum and the employee unions will receive three additional Board of Directors positions. Fiduciary Counselors, AIC and Eclat also noted that some of the information used by Eclat for the January 15, 2003 Valuation was not available during the initial valuation in the Eclat Report. Additionally, Northwest notes that the Letter Agreement between Northwest and ALPA relating to a voluntary contribution of Pinnacle Stock would provide ALPA with a role in reviewing and approving the termination, and any replacement, of the independent fiduciary. Pension Benefit Guaranty Corporation. Northwest expects that the Start Printed Page 49807board, like any board fulfilling its fiduciary duties, will seek to maximize the value of the enterprise. 17, 20.) Each of these plans is a Code section 401(k) plan that is tax qualified under section 401(a) of the Code and subject to ERISA. In the Proposed Exemption, it was noted that the length of the Deferral would be shortened if Pinnacle Stock was publicly traded at the time that the Put Option is exercised. Northwest represents that the final terms of the Omnibus Agreement reflect the fact that Fiduciary Counselors has represented the Plans' interests. Moreover, in connection with the Omnibus Agreement entered into between Fiduciary Counselors and Northwest, Fiduciary Counselors negotiated for limitations on Northwest's ability to unilaterally amend or terminate the ASA. As a condition of the Proposed Exemption, Fiduciary Counselors, using the services of its independent appraisal firm Eclat, Start Printed Page 49802determined the value of Pinnacle Stock. Comments: Commenters expressed a concern that the contribution of Pinnacle Stock involves a conflict of interest on the part of Northwest. Web2009: NORTHWEST AIRLINES RETIREMENT SAVINGS PLAN FOR SALARIED EMPLOYEES 2009 401k membership. Fiduciary Counselors also obtained a determination from Northwest's Pension Investment Committee that the holding of Pinnacle Stock would not impair the liquidity of the Plans and that the Plans would be able to pay benefits and expenses when due. Northwest asserts that in valuing Pinnacle Stock, there are well-established valuation methodologies available to the valuation experts to assess the value of non-public securities like Pinnacle Stock. Since Northwest was prohibited from investing the Pilot Plan's assets in employer stock, the Pilot Plan at that time, did not participate in the investment fund. are not part of the published document itself. He also filed a claim for long-term disability benefits under Northwest Airlines Long Term Disability Plan ("LTD Plan"). The 4.48% discount represents what Eclat used for Pinnacle's pre-tax cost of debt (9.6%) adjusted for a six-month period. Northwest sought the exemption to permit the Pinnacle Stock contribution as part of its overall strategy of managing the current economic uncertainty. (k) A statement of past transactions involving Pinnacle Stock, including dates, amounts, price, and whether the transactions were at arms-length, as well as a description of any attempts to buy or sell Pinnacle Stock over the last five years, including a description of any previous plans for initial public offerings. The attention of interested person is directed to the following: (1) The fact that a transaction is the subject of an exemption under section 408(a) of the Act and section 4975(c)(2) of the Code does not relieve a fiduciary or other party in interest or disqualified person from certain other provisions of the Act and the Code, including any prohibited transaction provisions to which the exemption does not apply and the general fiduciary responsibility provisions of section 404 of the Act, which require, among other things, a fiduciary to discharge his or her duties respecting the plan solely in the interest of the participants and beneficiaries of the plan and in a prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it affect the requirements of section 401(a) of the Code that the plan operate for the exclusive benefit of the employees of the employer maintaining the plan and their beneficiaries; (2) The exemption will not extend to transactions prohibited under section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code; (3) In accordance with section 408(a) of the Act and section 4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon the entire record, the Department finds that the exemption is administratively feasible, in the interests of the plans and their participants and beneficiaries and protective of the rights of the participants and beneficiaries of the plans; (4) This exemption is supplemental to, and not in derogation of, any other provisions of the Act and/or the Code, including statutory or administrative exemptions and transitional rules.
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