Fiduciary Counselors Inc., Washington, will ask a federal bankruptcy court judge to require US Airways Group Inc. to make its scheduled contributions to its retirement plans.
The firm was recently appointed independent fiduciary to the airline's pension and retirement plans.
And on Friday, United Airlines Inc., Elk Grove Village, Ill., appointed Independent Fiduciary Services Inc., Washington, as independent fiduciary for its pension plans as its parent, UAL Corp., wends its way through bankruptcy court. IFS will pursue claims regarding pension contributions owed to the plans with authority to initiate litigation or other action if there appears to be any breach of fiduciary duty. It also will recommend funding policies to United's board.
United owes $563 million in pension contributions for the rest of this year and faces $4 billion in pension obligations through 2008. United plans had $6.96 billion in assets and $12.65 billion in accumulated pension liabilities as of Dec. 31.
In the US Air case, Fiduciary Counselors will present its case to Judge Stephen S. Mitchell in U.S. Bankruptcy Court in Alexandria, Va., in a legal filing due Oct. 1, said Nell Hennessy, Fiduciary Counselors president. The firm also was the independent fiduciary to the Arlington, Va.-based airline's defined contribution plans when the company first filed for Chapter 11 bankruptcy in August 2002. The airline's defined contribution plans had assets of $552.9 million at the end of 2003, according to its July 13 filings with the SEC.
The consulting firm will ask the court to order the airline to contribute while in bankruptcy to its two defined benefit plans, for mechanics and flight attendants, and to a defined contribution plan for pilots and another defined contribution plan covering other employees, Ms. Hennessy said.
But Fiduciary Counselors could be facing an uphill battle competing for the company's limited cash reserves. US Airways has filed legal documents with the bankruptcy court seeking to pay only an unspecified portion of the $740 million in contributions it owes its pension funds over the next five years. The company acknowledged, in its legal filings, that Fiduciary Counselors' task is to get the company to contribute to its retirement plans.
The airline was required to contribute $238 million to its pension plans in 2004, but the Pension Funding Equity Act enacted in April helped ease airlines' liabilities and cut its contributions to $154 million this year. US Airways had contributed only $22 million of that in the first six months of this year.
In its Chapter 11 filings with the court on Sept. 12, US Airways officials said the company would not contribute the $110.5 million due Sept. 15, claiming that its unfunded pension obligations or "legacy costs" helped drive it into bankruptcy. The company is required to contribute another $14.5 million to its pension plans on each of two dates: Oct. 15 and Jan. 15, 2005
US Airways officials have already notified the court they intend to terminate both the mechanics and flight attendants pension plans, which had combined assets of $1.7 billion as of Dec. 31, and "cannot forecast future contributions to the pension/retirement plans," according to a statement on the airline's website describing its restructuring plans.
The company also is on the hook for contributions to a profit-sharing plan it set up for pilots after it shut down their underfunded pension plan in March 2003, prior to emerging from its first bankruptcy. A lawyer advising the company, who spoke on condition of anonymity, said the company's contributions amount to 30% of pay of the pilots, on average. Amy Kudwa, a spokeswoman for US Airways, would not say how much the company owes the plan this year, but said the company contributed $134 million to the plan from the time it was set up in April 2003 through the end of last year.
US Air contributed $40 million to its defined contribution plans for other employees last year after it came out of bankruptcy.
Under bankruptcy court protection, the airline can cancel its labor agreements, and walk away from its obligations to the pension and retirement plans.