Pursuant to its engagement letter with Northwest, the scope of Fiduciary Counselors' engagement includes determining whether to accept the Contribution on behalf of the Plans, and if so, to value the Pinnacle Stock for Plan funding purposes. The Independent Fiduciary must ensure that each appraisal, at a minimum, includes the following elements: (a) A summary of the appraiser's qualifications to evaluate Pinnacle Stock. Northwest Airlines, Inc.Current Liability Funded Status at January 1, 2003. In addition, in the paragraph immediately following subparagraph (iii) in the second column of 68 FR 2580, the reference to the price of Pinnacle Stock being determined as of the exercise date should be expanded to reflect these concepts. The IF Report represents that, in the January 15, 2003 Valuation, Eclat determined that the net equity value (before discounts) of Pinnacle was $412,923,928.00. Pinnacle itself had revenues of approximately $345.2 million for 2002. NWAI then transferred the Pinnacle Shares and the Series A Preferred Share to Northwest as a contribution to the capital of Northwest. Based on current client engagements, Fiduciary Counselors anticipates that the portion retained by it will comprise less than 5% of Fiduciary Counselors' gross revenue for 2003. A menu will appear on the left side of the screen. 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. Register, and does not replace the official print version or the official offers a preview of documents scheduled to appear in the next day's Although Eclat cannot know what market conditions might be like during this settlement period, this rate also exceeds the Plan's assumed asset earnings rate. documents in the last year. In the case of United Airlines, for example, the airline has not rejected the ASAs it has entered into with its regional airline partners Atlantic Coast Airlines, SkyWest and Air Wisconsin. The Public Inspection page As a condition to any such contribution by Northwest, the Independent Fiduciary must determine on behalf of the Plans that the acceptance of the contributed shares is prudent and in the interests of the Plans' participants and beneficiaries and otherwise consistent with the fiduciary standards of ERISA. You are here: . The Put Option is exercisable at any time by the Plan. Similar considerations will be taken into account by Fiduciary Counselors in determining whether to accept any future contribution of Pinnacle Stock. Northwest instructed State Street Bank to establish an Investment Fund in connection with the Plans' Master Trust. 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 The Term Sheet originally placed the right to request this fairness opinion solely on the Plans' director, who asked that this duty be placed on the independent directors of which the Plans' director is a member. The changes incorporated into the Omnibus Agreement were requested and approved by Fiduciary Counselors. include documents scheduled for later issues, at the request The ASA also was revised to eliminate the unilateral right of Northwest to terminate the ASA in the event of the bankruptcy of Northwest. See Omnibus Agreement at section 7.2. 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. Northwest responded that no similar legal restriction would apply to the repurchase of Pinnacle Stock pursuant to the exercise of the Put Option. Such techniques were employed by Fiduciary Counselors and Eclat in this circumstance. Similarly, in the second column of 68 FR 2588 (third full paragraph), the reference in subclause (II) to the closing price of Pinnacle shares on the closing date should refer to the last trading day before the closing date. 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. Thus, the fourth bullet point in the second column at 68 FR 2585 (describing certain voting rights) should be modified accordingly. Northwest also believes that the value of Pinnacle Stock is less exposed to bankruptcy risk than Northwest stock. As with all domestic U.S. carriers, Northwest has been hit by the drop in revenue due to lower overall yields and depressed passenger levels. The Department has, in transactions of this nature, placed emphasis on the need for an Independent Fiduciary and on such Independent Fiduciary's considered and objective evaluation of the transactions. Northwest asserts that its beliefs in this regard have been independently verified. Minnesota law would not restrict the repurchase of Pinnacle stock by Northwest, a Minnesota corporation, which issued the Put Option. Posted on . The Pinnacle Stock contributed to the Pilot Plan will be held in a separate, segregated subaccount of the Master Trust and held for the exclusive benefit of the Pilot Plan. Reported by Rebecca Moore Northwest's filing with the Securities and Exchange Commission says that participants' benefits accruals were frozen as of August 31. manchester united annual turnover; what dallas city council district am i in northwest airlines pension plan phone number. 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. 4. The length of the Deferral varies based upon a function of (1) the liquidity of Northwest (as defined in the Omnibus Agreement) and (2) the value of Pinnacle Stock contributed to the Plans. The Independent Fiduciary negotiated the terms of the Put Option which provide downside protection by permitting the Plans to sell the Pinnacle Stock back to Northwest for the greater of the original value at which it was credited to the funding standard account or its fair market value at the time it is sold back to Northwest. Northwest noted that, as is the case for sponsors of defined benefit plans, Northwest has adopted investment guidelines and asset allocation strategies that guide the investment of the Plans' assets. Enter the nine-digit employee number and press #. The IAM National 401 (k) Fund has 30,905 participant accounts and $743 million in assets under management. Publi . Maintaining liquidity is key to Northwest's strategy for avoiding bankruptcy. The Omnibus Agreement further requires that Northwest provide regular notice of its liquidity to Fiduciary Counselors. 01/18/2023, 41 Fiduciary Counselors will also determine fair market value at the time it exercises the Put Option so long as the shares of Pinnacle Stock are not publicly traded. The addition of the regional jets has more than doubled the size of the airline. Fiduciary Counselors also obtained a determination from Northwest's Pension Investment Committee that the holding of Pinnacle Stock would not impair the liquidity of the Plans and that the Plans would be able to pay benefits and expenses when due. In this event, a majority of the independent directors may require a fairness opinion from a nationally recognized investment banking firm. See Omnibus Agreement, Definition of Early Termination Event at section 1.1. 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. Page 49 of 61. legal research should verify their results against an official edition of Northwest represents that the amount of shares necessary to satisfy the required contribution was based upon a final valuation of Pinnacle by Fiduciary Counselors, relying on a valuation report prepared by Eclat Consulting. The complete Application file, including all supplemental submissions received by the Department, is available for public inspection in the Public Disclosure Room of the Employee Benefits Security Administration, U.S. Department of Labor, Room N-1513, 200 Constitution Avenue, NW., Washington, DC 20210. 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. documents in the last year, 16 On July 23, 2003, Northwest confirmed to the Department that the modifications to the ASA referred to in the Proposed Exemption have been made. The board noted that the company's obligation to the holders of the Series C Preferred Stock continues until Northwest has the ability to repurchase the Series C Preferred Stock. Contributions of Pinnacle Stock to the Salaried Plan and the Contract Plan will likewise be held in a separate segregated subaccount of the Master Trust and held for the exclusive benefit of each respective plan. These markup elements allow the user to see how the document follows the Northwest notes that quarterly valuations were contemplated in the Application, but a change to annual valuations was made when Northwest and Fiduciary Counselors agreed to the Term Sheet. As a condition of the Proposed Exemption, Fiduciary Counselors, using the services of its independent appraisal firm Eclat, Start Printed Page 49802determined the value of Pinnacle Stock. B. Northwest represents that the final terms of the Omnibus Agreement reflect the fact that Fiduciary Counselors has represented the Plans' interests. In addition, Pinnacle has an independent Board of Directors with one member appointed by Fiduciary Counselors, and the Fiduciary Counselors-appointed Board member is entitled to special voting rights on certain matters. The Special Conversion Option expired on February 9, 1994. The Proposed Exemption is part of Northwest's strategy to achieve that goal. For purposes of this requirement, the term employer real property means real property leased to, and the term employer securities means securities issued by, an employer any of whose employees are covered by the Plans or by an affiliate of such employer; and. Select the item (s) you need from this menu. 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. documents in the last year, 84 Eclat determined that Pinnacle and Northwest are healthy companies, even in light of current economic conditions in the airline industry. northwest airlines pension plan phone number. Northwest represents that it will make any such contributions in cash. As the Plans' independent fiduciary, Fiduciary Counselors must act prudently and in the interests of the Plans and their participants. This additional contribution was agreed upon as a result of a technical concern raised by Fiduciary Counselors regarding covenants in Northwest's $1.125 billion Credit and Guarantee Agreement dated October 24, 2000, as amended under which Northwest is the borrower (the Credit Agreement), with Northwest's bank lenders. [8] Northwest also noted that it assumes the investment risk associated with any investment by the Plans, including the investment in Pinnacle Stock, and must make up any investment losses through future contributions to the Plans. After that date, the Omnibus Agreement provides Fiduciary Counselors with the right to cause an IPO of Pinnacle Stock. In this environment, it is necessary to maintain high liquidity reserves to ensure the viability of the airline and protect the long-term interests of the pension plans and plan participants. 2. The Independent Fiduciary retained an independent, expert airlines valuation firm, Eclat, to provide valuation services. Thus, almost all of the Series C Preferred Stock that remains in the Employee Stock Plan is allocated to the accounts of employees represented by the IAM and IBT. However, Northwest notes that it has received the consent of the Air Line Pilots Association (ALPA), the union representing Northwest pilots, to permit the Pilot Plan to hold Pinnacle Stock (see below for discussion of the Northwest and ALPA Letter Agreement). However, Northwest has proposed to contribute Pinnacle Stock because it believes that it is a superior investment for the Plans. Based on input from AIC, Eclat then applied a 15 percent liquidity discount and a 5 percent minority discount. The Application pertaining to the exemption, the Proposed Exemption, the comments submitted to the Department and the responses to the comments, the transcript of the Hearing, and all other documents submitted to the Department concerning this exemption have been included as part of the public record of the Application. A decision to issue only additional Common Stock must be approved by a majority of the three directors elected by the holders of the Series C Preferred Stock. 4. Eclat used the Black-Scholes option-pricing model to determine the value of the Put Option. Fiduciary Counselors sent additional information to the Department on July 11, 2003. NWA Corp. has the option to repurchase such shares in cash, by the issuance of additional Common Stock, or by the use of cash and stock. Additionally, ALPA requested that it be involved in the monitoring of the Independent Fiduciary. Northwest noted that, as reflected in the Term Sheet, Fiduciary Counselors will determine the fair market value of the Pinnacle Stock contributed to the Plans on an annual basis and in advance of each contribution to the Plans. Ellen A. Hennessy will continue to be the primary person at Fiduciary Counselors handling its responsibilities as independent fiduciary to the Northwest Airlines defined benefit plans. (3) any corporation or partnership of which such person is an officer, director, partner, or employee. As of December 31, 2002, the carrier had taken possession of 51 regional jets. 7. The right to engage an investment banker on behalf of the Plans in an IPO, at Northwest's expense. documents in the last year, 90 In addition, Northwest will provide the Independent Fiduciary with the information required to be provided to its lenders under its credit agreement. All transactions involving the Plans in connection with the contribution of Pinnacle shares will be no less favorable to the Plans than arm's length transactions involving unrelated parties. Call 202.693.7773 or TTY 202.693.7755. 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. Eclat provided additional information in support of its view that the discount rates, and other factors used in determining the fair market value of the Pinnacle Stock were reasonable and theoretically sound. 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: (b) In the interests of the plans and their participants and beneficiaries; and. Since Northwest was prohibited from investing the Pilot Plan's assets in employer stock, the Pilot Plan at that time, did not participate in the investment fund. In addition, a fiduciary must act for the exclusive purpose of providing benefits to participants and beneficiaries; must act prudently; and must diversify the investment of plan assets to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. The Proposed Exemption contemplates both voluntary and required contributions to the Northwest Plans, as did the Application filed by Northwest on November 6, 2002 and the Omnibus Agreement. documents in the last year, by the Energy Department The Plan is a defined benefit pension plan for the benefit of certain union-represented employees. On January 17, 2003, the Department published a notice in the Federal Register (68 FR 2578) of a proposed individual exemption (the Proposed Exemption). Northwest stated that the language at section 5.1(b) of the Omnibus Agreement contains a representation that Northwest has the corporate and legal authority to meet its obligations under the agreement, including the Put Option. 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. 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