Retired Pilots’ Qualified Pension Benefit Claims

At the beginning of United's bankruptcy, many of United's retired pilots, surviving spouses and eligible dependents ("retired pilots") either filed proofs of claim on their own or sent URPBPA documents that allowed URPBPA to file proofs of claim on their behalf.  In addition, the Section 1114 Retired Pilots Committee filed a blanket proof of claim for all retired pilots for their loss of insurance-related benefits that occurred as a result of the Section 1114 process.  When a retired pilot files a proof of claim, the retired pilot is, in essence, telling the Court that he or she wants to be reimbursed (at least in part) for any benefits he or she may lose during the bankruptcy process.

United has agreed that, to the extent a retired pilot loses health insurance, life insurance or non-qualified pension benefits as a result of United's Chapter 11 reorganization, each retired pilot who has filed a proof of claim may recover a portion of his or her lost benefits.  United has, on the other hand, objected to any claim asserted by a retired pilot for his or her loss of qualified pension benefits.

On August 17, 2005, United filed its Twenty-Seventh Omnibus Objection to Claims.  In this objection, United asked the Court to rule that retired pilots have no right to assert claims for their loss of qualified pension benefits because, according to United's argument, only the Pension Benefit Guaranty Corporation ("PBGC") has the right to assert claims for qualified pension benefits.  As it was reported in a past website update, URPBPA filed a response to United's objection and argued that, because the PBGC violated ERISA by assigning 45% of its claim back to United in the PBGC-United agreement, the retired pilots should be able to assert a claim against United for that 45%.  The PBGC has filed a brief in support of United's position.

When United's objection regarding qualified pension benefits was first presented to the Court on August 26, 2005, the Court stated that it would continue the hearing until after the PBGC's involuntary termination trial.  Because the Court made a preliminary ruling in favor of the PBGC at the end of that trial (if the Court enters a final ruling and orders the termination of the A Plan, URPBPA will file an immediate appeal and seek to stay the enforcement the Court's ruling), the Court conducted a hearing on United's qualified pension benefit objection on October 21, 2005.  At that hearing, the Court ruled that retired pilots will not be permitted to assert claims against United for any loss of qualified pension benefits. 

In his ruling, Judge Wedoff commented that, since certain amendments to ERISA that were made in 1986 and 1987, no court has permitted retirees to assert their own claims against their former employers for the loss of qualified pension benefits.  These courts have held that, as a result of the ERISA amendments, these claims are now the exclusive property of the PBGC.  Although URPBPA argued that the PBGC lost its right to assert exclusive claims for qualified pension benefits when it improperly assigned 45% of its claim for unfunded benefit liabilities back to United, the Court stated that the PBGC's agreement with United did not distinguish this case from the other cases that have held that only the PBGC can assert claims for unfunded, qualified pension benefits.  URPBPA continues to believe that the PBGC's agreement with United violates ERISA and is prejudicial to the rights of United's retired pilots.

The Court also stated that, if the PBGC has violated ERISA, the only recourse a retired pilot would have is a lawsuit against the PBGC.  The Court did not make any assessment regarding whether a retired pilot who sues the PBGC would be likely to succeed and obtain a financial recovery.

URPBPA believes that the Court's ruling is another unfortunate example of how the courts have interpreted ERISA in a way that limits the protections ERISA was supposed to afford retirees.