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Labor Department Grants Exemption for Northwest Airlines Pension
Contribution
WASHINGTON—The U.S. Department of Labor’s Employee
Benefits Security Administration (EBSA) today announced that
it has granted an exemption to allow Northwest Airlines, Inc.
to contribute stock of a regional airline affiliate in lieu
of cash to its three defined benefit pension plans. The exemption
will be published in the Aug. 19, 2003, Federal Register.
Northwest Airlines, Inc., headquartered in Eagan, Minn., sponsors
the three plans for 72,854 employees nationwide. The exemption
allows Northwest to make in-kind contributions to its plans
of stock of Pinnacle Airlines Corporation, a regional Northwest
affiliate.
The Employee Retirement Income Security Act (ERISA) generally
prohibits in-kind contributions except under certain statutory
exceptions or if the Labor Department grants an exemption that
protects the interests of workers and retirees covered by the
plan. The department has used its exemption authority to grant
relief for similar types of transactions in the past.
The Labor Department proposed the Northwest exemption on Jan.
17, 2003. Since then, the department held two days of public
hearings and reviewed public comments before revising and ultimately
granting the exemption. Based on the input of interested parties
and the adoption of additional protections, the department found
that the transactions would be in the interest and protective
of the pension plans’ workers and retirees.
An independent fiduciary has been retained by the pension plans
to establish the fair market value of the Pinnacle stock and
to determine that the stock is a prudent investment for the
plans. The plans will receive financial protections and governance
rights as negotiated by the independent fiduciary on their behalf.
The proposed exemption would permit: 1) in-kind contribution
of shares of Pinnacle Airlines stock to Northwest’s defined
benefit plans; 2) holding of the stock by the plans; 3) the
sale of the stock by the plans to Northwest; 4) the acquisition
and exercise by the plans of a put option granted by Northwest;
and 5) the guaranty to the plans by Northwest Airlines Corporation
of Northwest’s obligation to honor the put option.
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