Labor Department Proposes Exemption For Northwest Airlines to Contribute Corporate Stock

Archived News Release — Caution: Information may be out of date.

Washington, DC - The U.S. Department of Labor’s Pension and Welfare Benefits Administration today announced a proposed exemption that would allow Northwest Airlines, Inc., if granted, to contribute stock of a regional airline affiliate in lieu of cash to its three defined benefit pension plans.

Northwest Airlines, Inc., headquartered in Eagan, Minnesota, sponsors three defined benefit plans for 72,754 employees nationwide. Cumulatively, the plans have $4.381 billion in assets as of January 2002.

The airline requested the exemption to maintain a high level of liquidity during the current economic challenges facing the airline industry. The proposed exemption is designed to allow Northwest to meet its long-term pension plan funding obligations while maintaining its financial liquidity.

If granted, the exemption would allow Northwest Airlines to meet its current obligation to make contributions to its plans through the in-kind contribution of stock of Pinnacle Airlines, a regional Northwest affiliate. A contribution is due on January 15, 2003.

The Employee Retirement Income Security Act (ERISA) generally prohibits in-kind contributions, except in certain statutory exceptions. The law does give the department authority, however, to grant exemptions that protect the interests of plan participants and beneficiaries.

The department has used its exemption authority to grant relief for similar types of transactions in the past. The department is willing to consider such exemption applications when the value of the contributed assets can be independently determined and the plan receives actual ownership rights to those assets.

The proposed exemption would permit: 1) in-kind contribution of shares of Pinnacle Airlines stock to the defined benefit plans in order to satisfy all or part of Northwest’s minimum funding requirements; 2) holding of the stock by the plans; 3) the sale of the stock by the plans to Northwest; and 4) acquisition and exercise by the plans of a put option granted by Northwest.

The notice of a proposed exemption, scheduled to be published in the January 17, 2003 Federal Register, gives the public an opportunity to present comments. Comments on the proposal and any requests for a public hearing should be submitted by March 3, 2003, by mail to the Office of Exemption Determinations, Pension and Welfare Benefits Administration, Room N-5649, U.S. Department of Labor, 200 Constitution Ave., N.W., Washington, D.C. 20210, Attention: Exemption Application Numbers D-11137-39, or by electronic mail to moffittb@pwba.dol.gov.

Copies of the proposed individual exemption will be available on PWBA’s Web site at www.dol.gov/pwba.

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Archived News Release — Caution: Information may be out of date.