Aer Lingus Group PLC’s plans to restructure its Irish Airlines (General Employees) Superannuation Scheme, Dublin, which includes freezing the fund, have been approved by the Irish Pensions Authority, with changes expected to become effective Jan. 1.
The fund, which also includes employees from the Dublin Airport Authority, will be frozen and participants will be transferred into a new defined contribution plan. A spokesman for Aer Lingus said benefits accrued in the IASS up to this point would be protected.
The IASS is unusual in that the contribution rate is fixed, and cannot be changed without the agreement of the employer and employees. The airline’s 2013 annual report, for the year ended Dec. 31, 2013, said this means that “from the employer’s perspective, it is a defined contribution scheme. However … the pension scheme targets benefits linked to final salary and length of service.”
The IASS has a deficit of about €750 million ($914.5 million), the spokesman said. The report said about 65% of the plan’s liabilities were associated with current or former members of Aer Lingus’ staff. The amount of the fund’s assets could not be learned by press time.
The approved changes will see Aer Lingus Ltd. pay a one-time €191 million payment to the new DC plan. About euro;147 million will go to current employees through their individual plans within the new DC plan, and €44 million will be go to former employees who have not yet retired.
In a notice sent to shareholders in November, the airline said the changes would reduce industrial relations risk faced by the airline, provide a “sustainable solution for the IASS that otherwise may be forced to be wound up,” and will “put future pension provision for general employees (i.e. non-pilot employees) of Aer Lingus on a sustainable footing.”
The IASS investment strategy will continue to be followed for existing assets.