Below is an email from our District 1 VP Dennis Trainor:
On June 29th of last year, our Frontier members received a notice from the company informing them that Frontier had submitted an application to the IRS to delay payment of its required pension contributions for 2020. I'm attaching that notice to this email.
In a recent meeting with Frontier management, CWA leadership was informed that Frontier's application to the IRS has been approved.At that meeting, Frontier management indicated that this approval was very likely to reduce the pension funding percentage (AFTAP) for the 2021 plan year to below 80%.
If the pension funding level for the new plan year is certified below 80%, lump sum distributions as of April 1 would be limited to no more than 50% of the total benefit value. If the funding level is found to be below 60%, lump sum payment would be completely restricted.
Frontier management currently reports that they expect to successfully emerge from bankruptcy sometime in March. As you well know, Frontier is prohibited from paying lump sum distributions from the pension plan while in bankruptcy.
Because the new plan year begins in April, any lump sum restrictions that result from a reduced pension funding percentage will go into effect immediately upon emergence from bankruptcy.
Question on the Connecticut Cash Balance Plan
I also asked for clarity on how lump sum restrictions potentially triggered by the funding percentage dropping below 80% might impact the cash balance plan in Connecticut. The cash balance plans typically pay out as lump sum, but the CT plan offers an enhanced annuity option that's very popular. Would the Company be able to help us get clarity on whether the cash balance lump sum distribution would be restricted if the plan fell below 80% and if the enhanced annuity provisions would be impacted at all in that scenario?
- If the plan's funded status is between 60-79%, the lump sum distribution option would be available at 50%.
- The Enhanced Annuity provisions in the East Plan would not be affected by the Plan's funding level.
So, it appears that the enhanced annuity under the CT cash balance plan will NOT be affected by a drop in pension funding.
There are many details we are seeking to better understand at this time:
- The final certified funding percentage for the 2021 plan year
- To what extent pension plan relief that was approved by the House Ways and Means Committee last week for inclusion in American Rescue Plan COVID-19 relief bill would improve the 2021 funding percentage
- What specific provisions of each component of the Frontier plan might be affected by lump sum restrictions
I will continue to keep you informed as CWA learns more.with the connectivity we deserve.