United’s Letter to Retirees

Below is a copy of United’s letter to pilot retirees announcing suspension of the company’s nonqualified pension payments. It was given to Workforce Management by a member of the United Retired Pilots Benefit Protection Association.
 

February 3, 2005

Dear Participant:

This letter is to inform you that in the wake of recent legal actions by the Pension Benefit Guaranty Corporation (“PBGC”), United believes it is appropriate to suspend further payments of non-qualified benefits, after the February 1, 2005, payment, pending resolution of those legal actions. At this time, this change does not affect the payment of qualified benefits.

On December 9, 2002, United filed for bankruptcy protection and was prohibited from paying any pre-petition obligations, including the payment of non-qualified benefits to current retirees. However, on the first day of the bankruptcy case, United received the authority to continue paying those non-qualified benefit payments, but was not required to do so by the court. Over the last two years, we have continued to make monthly non-qualified benefit payments.

As you may know, we recently sought and achieved court approval of our agreement which was recently ratified by the Air Line Pilots Association (“ALPA”), in which, among other things, ALPA agreed that if United seeks to voluntarily terminate the pilots’ defined benefit pension plan (the “A Plan”) after April 11, 2005, then ALPA will not oppose United’s efforts, and will waive any claim it may have that the termination of the “A Plan” violates the ALPA collective bargaining agreement. If and when the “A Plan” is terminated, the non-qualified benefits will cease.

However, on December 30, 2004, the PBGC initiated legal action seeking to involuntarily terminate the “A Plan” effective December 30, 2004, many months before any effective date of termination contemplated by the ALPA tentative agreement. That action is in its initial stages. But given the PBGC’s intervention, we believe it is appropriate to suspend non-qualified benefits. If and when a termination date is set, United intends to make non-qualified payments for the period between the suspension of non-qualified payments and the court-approved termination date.

We will keep you informed about further developments. If you have any questions, please call United’s Pension Department at (866) – (number withheld).

Sincerely,

Lynn Hughitt
Vice President, Compensation & Benefits