Magazine article Workforce Management

Airlines Turn to Multiemployer Pension Plans

Magazine article Workforce Management

Airlines Turn to Multiemployer Pension Plans

Article excerpt


With defined-benefit pensions collapsing at a steady pace, one ailing industry is partially bucking the trend. In negotiations with unions, airlines are putting many employees into multiemployer plans, a form of the defined-benefit arrangement.

Bankrupt Northwest Airlines is the latest example. Two unions have agreed with the carrier's proposal to replace the company's faltering pension plan with the International Association of Machinists National Pension Fund.

The International Association of Machinists fund is supported by 1,700 contributing employers and has $6 billion in net assets. It serves more than 68,000 retirees and beneficiaries. Proponents say it has remained strong because companies are compelled to make contributions each month and the fund is managed by an independent board.

Northwest's agreement, covering 7,695 clerical, office, fleet and passenger service employees, was accepted on March 7. Two other unions represented by the machinists rejected the company offer, which also included wage and job cuts and health care benefit reductions.

Other airlines that have put employees into the machinists' plan include United, Aloha and US Airways. At Continental, union employees have the option of going into the machinists' plan now or later if the airline freezes its pension.

Northwest wouldn't comment on union negotiations, and United didn't respond to an interview request. The practical effect of airlines taking the multiemployer option is the same as making a consistent and predictable payment into a direct-contribution pension plan, except that the money is going into the International Association of Machinists fund.

The union boasts that its plan is holding down the fort for defined benefits. Northwest, like most airlines, is putting pensions behind it. It is pursuing a long-term strategy of establishing a 401(k) retirement program for its employees. …

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