In view of the comments requesting a hearing, on March 11, 2003, the Department published in the Federal Register (68 FR 11589) a notice of hearing on the Proposed Exemption. Northwest Airlines Freezes Pension Plans September 9, 2005 (PLANSPONSOR.com) - Northwest Airlines has frozen two pension plans that cover salaried employees, Business Insurance reports. The Independent Fiduciary and its advisors analyzed the voting, transfer and put right features of the Pinnacle Stock and engaged in significant negotiations on those features with Northwest. This is primarily due to the fact that Southwest Airlines does not serve 2 of the 3 Northwest hubsMemphis (Pinnacle's largest market) and Minneapolis. We discussed the Series C Preferred Stock buy back at length in our regularly scheduled April and June board meetings, and held two special meetings in July devoted exclusively to the Series C issue * * *. documents in the last year, by the Engineers Corps and the Environmental Protection Agency As Pinnacle grows to 95 aircraft, the number of passengers and revenue will more than double. electronic version on GPOs govinfo.gov. 8. The Independent Fiduciary must investigate the facts and assumptions underlying the appraisals to ensure that stock contributions are not valued at more than fair market value. Northwest represents that, if the Independent Fiduciary determines that the Pinnacle Stock previously contributed to the Plans was worth less at the time of the contribution than the amount attributed to it at the time of the contribution, Northwest shall contribute additional Pinnacle Stock or cash in amounts sufficient to make up the shortfall. In addition, Northwest will provide the Independent Fiduciary with the information required to be provided to its lenders under its credit agreement. While all of the Big 6 network airlines are losing money, Northwest has suffered the smallest loss of any carrier. Title: NORTHWEST AIRLINES EXCESS PENSION PLAN FOR SALARIED EMPLOYEES Date: 3/16/2007 Industry: Airline Sector: Transportation. The monthly contributions required to be made to the Pilot Plan pursuant to the pilot collective bargaining agreement are waived for the 2004 and 2005 Plan Year. has no substantive legal effect. On January 11, 2003, the Independent Fiduciary and its advisors conducted a telephone interview with Pinnacle's chief executive officer and chief financial officer as part of its due diligence. The Independent Fiduciary negotiated further powers with respect to the Plan director, including the right to object to Business Combinations involving Northwest's affiliates. The Delaware law does not apply to the repurchase of Pinnacle Stock, which is not treated as NWA Corp.'s own stock. Additionally, ALPA requested that it be involved in the monitoring of the Independent Fiduciary. In addition to determining the value of Pinnacle Stock at the time of a proposed contribution, the Independent Fiduciary will provide an annual written valuation of the per share value of all Pinnacle Stock held by the Plans as of each December 31 and at any time the Independent Fiduciary exercises the Put Option described below. This repetition of headings to form internal navigation links Northwest may not terminate Fiduciary Counselors as the Independent Fiduciary without the consent of ALPA and may not appoint a new Independent Fiduciary without the consent of ALPA. The Series C Preferred Stock ranks senior to Common Stock with respect to liquidation and certain dividend rights. Pinnacle Airlines Corp. is the holding company of Pinnacle Airlines, Inc. 2. These can be useful Northwest reported a net loss of $46 million, with operating income of $8 million in the 3rd quarter of 2002. Preview; Edit & Save; Related Documents; 50 of the Top 250 law firms use our Products every day. The information addressed, among other issues, how the possibility of a Northwest bankruptcy was factored into the valuation, how the valuation was stress tested for other assumptions contained in the valuation, and the reasons for the selection of a 15% liquidity discount. Definitions at (a) of the Proposed Exemption in column 1 of 68 FR 2590, the reference to 5 percent (5%) of such fiduciary's gross income, for Federal income tax purposes, in its prior tax year, will be paid by Northwest should read 5 percent (5%) of such fiduciary's annual gross revenue in the year of its engagement, will be paid by Northwest.. App. In the absence of the contribution of Pinnacle Stock, the Plans could suffer from increased underfunding. The right to engage an investment banker on behalf of the Plans in an IPO, at Northwest's expense. Once these growth assumptions are made, the present value of expected free cash flow is calculated. An additional provision that would prohibit Northwest from using its rights under the Series A Preferred Share to block a Transfer of Pinnacle Stock following an Early Termination Event. We are an independent firm and are not in the investment advisory or trust business. Payment will be made to Fiduciary Counselors, which will remit 75% to AIC. As reflected in the Proposed Exemption, another Aon affiliate does provide non-plan services to Northwest, albeit services representing less than 1% of Aon's total annual revenue. The terms of the ASA and related agreements are more favorable to Pinnacle than an arm's length transaction between unrelated parties, and substantially determine and enhance the value of Pinnacle. Accordingly, the fiduciaries of a plan must act prudently, solely in the interest of the plan's participants and beneficiaries, and with a view to the need to diversify plan assets when deciding whether to accept an in-kind contribution. Maintaining liquidity is key to Northwest's strategy for avoiding bankruptcy. 68 FR 49792 - Northwest Airlines Pension Plan for Salaried Employees (Salaried Plan), the Northwest Airlines Pension Plan for Pilot Employees (Pilot Plan), and the Northwest Airlines Pension Plan for Contract Employees (Contract Plan) (Collectively, the Plans), Located in Eagan, MN To exercise the Put Option, the Independent Fiduciary must provide written notice to Northwest of its election to put to Northwest any or all of the shares of Pinnacle Stock then held by the Plans. See Omnibus Agreement at section 9.1(d). Northwest represents that the contribution was effected after the date on which the Department had completed work on the Proposed Exemption. (c) The term control means the power to exercise a controlling influence over the management or policies of a person other than an individual. Reliance solely on the valuation provided by the appraiser would not be sufficient to meet this prudence requirement. Northwest provided the funded status of each Plan as of 1/1/03 as shown in the following table. About the Federal Register (This is not a toll-free number.). NORTHWEST AIRLINES INC. 2700 Lone Oak Pkwy. Defined Benefit Master Trust : C/O Delta Air Lines, Inc., 1030 Delta Boulevard, Atlanta, US-GA, 30354, US: 2012-12-18: Delta Pilots Disability and Survivorship Plan : C/O Delta Air Lines, Inc., 1030 Delta Boulevard, Atlanta, US-GA, 30354, US: 2012-12-04: Northwest Airlines Pension Plan for Salaried Employees A Notice by the Employee Benefits Security Administration on 08/19/2003. 2. In contrast, under its new ownership, neither Fiduciary Counselors nor any affiliate will accept any other engagement from Northwest while it is independent fiduciary for the Plans. Press "1" to indicate that the employee number is all numeric. In addition, the fiduciary obligation to act prudently requires, at a minimum, that the independent fiduciary conduct an objective, thorough, and analytical critique of the valuation. Northwest explained that the Omnibus Agreement granted the Plans additional rights in order to protect their interest in the Pinnacle Stock. NWAI then transferred the Pinnacle Shares and the Series A Preferred Share to Northwest as a contribution to the capital of Northwest. With PBGC's consent, Eclat was subsequently retained by the Independent Fiduciary to value the Pinnacle Common Stock. Agency Employee Benefits Security Administration Date January 16, 2003 Release Number 03-3 For example, the Plans obtained a Put Option, corporate governance rights, voting rights in Pinnacle and the right to initiate an IPO or sale of Pinnacle Stock. This is because a cash contribution is not a viable alternative given the company's liquidity needs. On June 27, 2003, ALPA and Northwest provided the Department with a Letter of Agreement between Northwest and the Northwest airline pilots represented by ALPA (the Letter Agreement) regarding the acquisition and holding of Pinnacle stock by the Northwest Pension Plan for Pilot Employees (the Pilot Plan). NWA is the plan administrator and the employer plan sponsor of the Plan. Thus, to eliminate the potential for a conflict of interest, two parties completely independent of NorthwestFiduciary Counselors and Eclatrepresented the interests of the Plans in connection with the transaction. The shares were then allocated to individual accounts established on behalf of each eligible employee. Northwest also believes that the value of Pinnacle Stock is less exposed to bankruptcy risk than Northwest stock. The selection of an independent qualified appraiser to determine the value of an in-kind contribution and the acceptance of the resulting valuation are fiduciary decisions governed by the provisions of Part 4 of Title I ERISA. The original Employee Stock Plan was established in 1993. Ellen A. Hennessy will Start Printed Page 49805continue as President of Fiduciary Counselors and, as majority shareholder of Fiduciary Group, will continue to control management decisions with respect to Fiduciary Counselors. 4. Section 1C of the Northwest Pilots Agreement, the Collective Bargaining Agreement between Northwest and the Air Line Pilots Association dated as of September 13, 1998, as amended, or any successor agreement. (n) An analysis of the degree to which actual control (both in form and in substance) will pass to any of the Plans as a result of any of the contemplated transactions, (o) To the extent that Pinnacle's current or projected revenues and expenses are related to, or dependent upon, contracts, agreements, or understandings between Northwest and Pinnacle, an analysis of Northwest's financial condition, the likelihood of a Northwest bankruptcy, and the potential impact of a Northwest bankruptcy on those contracts, agreements, or understandings, and on the market value of Pinnacle Stock, and. At the time a participant exercises conversion rights, the Series C Preferred Stock is converted to Common Stock, the Common Stock is sold and cash is allocated to participant accounts. Any transaction involving Northwest outside the ordinary course of business that involves more than $2 million and any ordinary course transaction that involves more than $5 million must be approved by a majority of the independent directors. The labor situation is Start Printed Page 49797stable. The amount of the Initial Contribution is equal to the amount that was required to meet the quarterly funding requirements under ERISA section 302 and Code section 412(l) for the Contract Plan due on January 15, 2003. The Independent Fiduciary also engaged the law firm of Jones Day as legal counsel to advise it in connection with its negotiations with Northwest regarding its engagement and Eclat, to provide financial expertise and to value the Pinnacle Stock. However, because of its liquidity needs, a cash contribution is not a viable alternative. Northwest Response: Northwest explains that, while the Proposed Exemption and the Omnibus Agreement negotiated with Fiduciary Counselors do not require collateral, the Proposed Exemption and the Omnibus Agreement include provisions designed to limit the need for collateral. The Contract Employees share of the Master Trust assets are $1,665,979,000. This is because a regional airline derives its value from the value of its ASA with the major carrier and the major carrier is unlikely to terminate the ASA in bankruptcy because it would severely disrupt the flow of high yield passengers. The Pilot Plan and its participants benefit from the voluntary contribution by providing an early contribution of an asset with significant Start Printed Page 49806value to more adequately fund the benefits promised under the Pilot Plan. Similar considerations will be taken into account by Fiduciary Counselors in determining whether to accept any future contribution of Pinnacle Stock. manchester united annual turnover; what dallas city council district am i in northwest airlines pension plan phone number. 01/18/2023, 41 Finally, the Department notes that the Independent Fiduciary's satisfaction of its obligations in connection with the determination of the fair market value of the Pinnacle Stock as previously described by the Department in the Preamble to the final exemption is a critical factor in the Department's decision to grant a final exemption. The attention of interested person is directed to the following: (1) The fact that a transaction is the subject of an exemption under section 408(a) of the Act and section 4975(c)(2) of the Code does not relieve a fiduciary or other party in interest or disqualified person from certain other provisions of the Act and the Code, including any prohibited transaction provisions to which the exemption does not apply and the general fiduciary responsibility provisions of section 404 of the Act, which require, among other things, a fiduciary to discharge his or her duties respecting the plan solely in the interest of the participants and beneficiaries of the plan and in a prudent fashion in accordance with section 404(a)(1)(B) of the Act; nor does it affect the requirements of section 401(a) of the Code that the plan operate for the exclusive benefit of the employees of the employer maintaining the plan and their beneficiaries; (2) The exemption will not extend to transactions prohibited under section 406(b)(3) of the Act and section 4975(c)(1)(F) of the Code; (3) In accordance with section 408(a) of the Act and section 4975(c)(2) of the Code and the procedures set forth in 29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon the entire record, the Department finds that the exemption is administratively feasible, in the interests of the plans and their participants and beneficiaries and protective of the rights of the participants and beneficiaries of the plans; (4) This exemption is supplemental to, and not in derogation of, any other provisions of the Act and/or the Code, including statutory or administrative exemptions and transitional rules. Fiduciary Counselors assumed that since Northwest could take up to 180 days to settle the option that it would. No commissions, fees, costs, charges or other expenses will be borne by the Independent Fiduciary or the Plans in connection with any acquisition, holding or disposition of Pinnacle shares to or from the Plans, other than the underwriters' discount or other broker-dealer fees or commissions charged in any sale of such shares. Until the Series C stock is repurchased, each share will accrue a 12% per year dividend on the $46.96 per share buy back price. Fiduciary Counselors asserts that the sale of Fiduciary Counselors will, if anything, increases their independence. An Initial Contribution was made in the amount of $41,149,911. Additionally, the Independent Fiduciary corrects language in the fifth paragraph of the Voting Provisions of the Proposed Exemption that states a majority of Pinnacle's board is needed for the approval of compensation of Pinnacle's CEO. However, the Omnibus Agreement revises this provision to provide that, if Pinnacle Stock is publicly traded, the Deferral will be reduced, in each case, by thirty days except that in no event shall Northwest have less than a 30 day Deferral in which to close the transactions contemplated by the Put Option. Based on input from AIC, Eclat then applied a 15 percent liquidity discount and a 5 percent minority discount. Northwest represents that the final terms of the Omnibus Agreement reflect the fact that Fiduciary Counselors has represented the Plans' interests. In determining the fair market value of the Pinnacle Stock, the Independent Fiduciary obtains an appraisal from an independent qualified appraiser selected by the Independent Fiduciary, and ensures that the appraisal and the Independent Fiduciary's analysis of the appraisal are consistent with sound principles of valuation and with the elements described by the Department in the Preamble to this final exemption in the section entitled Duties of the Independent Fiduciary; (g) The terms of (1) the Put Option granted by Northwest; (2) any exercise of the Put Option by the Plans; and (3) any sale of the Pinnacle Stock by the Plans to Northwest other than through the exercise of the Put Option will be in accordance with the terms set forth in the Term Sheet and the Omnibus Agreement; (h) Immediately after each contribution, employer securities and employer real property, including the Pinnacle Stock, will represent no more than 10 percent (10%) of the value of each Plan's assets. Each Plan's percentage ownership reflects the relative size of each Plan to each other. offers a preview of documents scheduled to appear in the next day's In this Issue, Documents Regional airlines play an indispensable role in providing major airlines with important access to passengers, largely from markets too small to be serviced by a major airline. The Independent Fiduciary was also advised on the requirements of the U.S. Department of Transportation regarding restrictions on directors of airlines. Eagan, MN 55121-1534. documents in the last year, 1487 Comments: Commenters expressed a concern that the contribution of Pinnacle Stock involves a conflict of interest on the part of Northwest. Fiduciary Counselors and Eclat represent that Eclat was originally retained by PBGC to value Pinnacle and to evaluate the financial viability of Northwest. Select the item (s) you need from this menu. 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