An Expanded Explanation of Proof Claims and United’s Recent Objections

Prepared by URPBPA Legal Advisors

On July 27, 2005, United filed with the court its Twenty-Seventh Omnibus Objection to Claims.  In this document, United raises a number of objections regarding proofs of claim that have been filed in connection with United’s bankruptcy proceedings, including proofs of claim filed by retired pilots.  An explanation regarding United’s filing, and the United Retired Pilots Benefit Protection Association’s (“URPBPA’s”) response, follows. 

In early 2003, URPBPA filed proofs of claim on behalf of many of URPBPA’s members.  Other URPBPA members and retired pilots filed their own proofs of claim.  These proofs of claim were filed to help retired pilots, spouses and dependents recover part of their losses if their retirement benefits are reduced during United’s bankruptcy proceedings.  The proofs of claim filed by URPBPA included claims for potential losses due to any changes in medical, life insurance, qualified pension or non-qualified pension benefits.   

In early 2003, the Pension Benefit Guaranty Corporation (“PBGC”) also filed its own proofs of claim, including proofs of claim related to the pilots’ defined benefit plan (the “Pilot Plan”).  In these proofs of claim, the PBGC asserts that, if the Pilot Plan is terminated, and if the Pilot Plan is underfunded, United should be required to pay the PBGC to help increase the Pilot Plan’s funding level.   

Last December, the PBGC filed an “involuntary termination” proceeding through which it is attempting to terminate the Pilot Plan.  As most of you know, Judge Wedoff is scheduled to rule on the PBGC’ motion for summary judgment on August 26, 2005 and, if that motion is denied, the PBGC’s involuntary termination proceeding will go to trial September 21 through 23, 2005. 

In United’s Twenty-Seventh Omnibus Objection to Claims, United has argued that, if the Pilot Plan is terminated, only the PBGC is entitled to assert proofs of claim with respect to qualified pension benefits from the Pilot Plan.  United argues that, to the extent any retired pilot has filed a proof of claim asserting a claim for qualified pension benefits, these claims should not be allowed.  United argues that, if it is required to pay money out of the bankruptcy estate to help make up for the underfunding of the Pilot Plan, the money it pays should go to the PBGC and not directly to retired pilots.

On August 17, 2005, URPBPA filed a response to United’s Twenty-Seventh Omnibus Objection to Claims.  In its response, URPBPA argues that individual retired pilots do have the right to assert claims against United for any qualified pension benefits they will lose if the Pilot Plan is terminated.  URPBPA’s response also argues that it is premature for the Court to determine whether retired pilots’ claims for qualified benefits are valid because the Pilot Plan has not been terminated.  URPBPA’s response is attached to this website update.

URPBPA wants to clear up a few misperceptions regarding United’s filing.  First, if Judge Wedoff grants United’s objection to the proofs of claim filed by retired pilots, his ruling will not terminate the Pilot Plan.  It will only affect the amount retired pilots will be able to recover at the end of United’s bankruptcy if the Pilot Plan is terminated.   

Second, if a retired pilot did not file a proof of claim, this does not mean that retired pilot will lose their pension benefits in the event the Pilot Plan is terminated.  If the Pilot Plan is terminated, the PBGC will take over all of the assets of the Pilot Plan and will continue to pay pension benefits to United’s retired pilots.  Although many retired pilots will suffer a reduction in their benefits if the Pilot Plan is terminated, participants will continue to receive monthly pension checks from the PBGC.

Third, if United’s objection is granted, this will not invalidate the proofs of claim filed by United’s retired pilots.  United is only objecting to a portion of those proofs of claim.  Untied is not, for instance, objecting to the retired pilots’ right to assert claims for any reduction in benefits that may occur if the non-qualified portion of the Pilot Plan is terminated.