First, here’s some necessary background information. The Employee Retirement and Income Security Act (ERISA) of 1974 established the Pre-Retirement Survivor Annuity (PRSA) for married participants in a defined benefit pension plan if an early retirement benefit was available. It did not establish who was to cover the cost of such a benefit. It merely established that a pension plan could not establish a form of benefit that could protect a surviving spouse with an annuity equal to 50 percent of the normal retirement amount. This amount is reduced slightly for the difference in the life expectancies of the spouse and the participant. If that spouse dies before reaching the earliest retirement age of 50, the surviving spouse cannot collect until the deceased would have attained 50.

The Retirement Equity Act of 1984 changed the name of this annuity to QPSA and mandated that a participant could not be charged for the cost of QPSA unless proper notification was provided to the participant and s/he was afforded an opportunity to decline or accept coverage. Once this notification was given, the Company would then have the right to charge participants for the coverage.

However, the Company opted not to charge for the benefit until 1994, when it enacted the change and notified pilots that they could waive coverage and its charge, or a pilot could default into coverage. Waiving coverage required the execution of a form by the pilot and his/her spouse. It had to be notarized and a confirmation would have been sent by the Company when that waiver was enacted. If you have never received a confirmation, you should call the Benefits Administration Hotline at 800-872-4780 to determine whether or not you are covered and formally request a written confirmation of your status for your own personal records.

Your ultimate pension benefit is reduced by set percentages for the period of time that QPSA coverage is in effect. You can move in and out of covered status simply by calling Benefits Administration and executing a new set of forms. The charges are:

0.0001 for every month of coverage from age 35 to 44
0.0002 for every month from 45 to 49
0.0004 for every month from 50 to 60

If a pilot turned 35 and elected the QPSA at that time, keeping it until retirement, the reduction to his initial pension calculation would amount to 7.2 percent (120 months at 0.0001, 60 months at 0.0002, and 120 months at 0.0004). If you were more ‘chronologically gifted’ (older) at the time the change was instituted, your reduction would be less.

For example, a pilot was 50 when he opted into the coverage. He retires at 60 with a reduction factor for QPSA coverage of 120 months at 0.0004 or 4.5percent. His calculation would look like this:

When a pilot dies while active or on long term disability, his/her eligible survivors are entitled to a benefit under the Survivor Income Plan. Eligible survivors are defined as pilot’s spouse or natural or legally adopted children under 19 years of age or under 23 years of age, if certified as a full time student. The spouse of a pilot who dies prior to age 50 will receive 25 percent of his/her Final Average Earnings (as defined in the Pension Plan, although this is NOT a pension benefit). If there is a spouse and an eligible child, s/he would receive 30 percent. If there are two eligible children, s/he would receive 35 percent.

If a pilot deceases at or after age 50, the sole spouse receives 30 percent. With one dependent, s/he receives 35 percent. These benefits are payable to his/her for his/her lifetime or until s/he remarries.

The widow (or widower) will be given the choice of collecting this monthly amount (often referred to as an annuity since it is a stream of equal payments) or to collect the lump sum value of basic life insurance in effect at the time of the pilot’s death. If the annuity is chosen, the life insurance becomes the funding vehicle for the annuity. For example, a pilot (age 51) has $150,000 in basic life insurance. His final average earnings are $15,000 per month. His surviving spouse is eligible for 30% of the $15,000 per month, or $4,500 per month OR the lump sum of $150,000 in life insurance. If she chooses the annuity of $4,500 per month, she will receive these payments for the remainder of her life or until she remarries. If she collects these payments for only 34 months, she has already exceeded the value of the lump sum life insurance. She continues to collect the payments with the only change being the taxability of her monthly check. Once the life insurance funding has been exhausted, the payment is then drawn from the Company coffers which makes it subject to all normal taxes.

The Optional Life Insurance is always available as a lump sum and doesn’t enter into the calculation of the Survivor Income Plan.

So, if I’ve elected QPSA, and I die prior to retirement, what does my spouse get?

Your spouse gets the 50 percent Joint & Survivor Annuity from the Retirement Income Plan for Pilots of US Airways, Inc. (Pension Plan) and gets a benefit from the Survivor Income Plan as either an annuity, which is dependent upon your age at death and how many eligible dependents there are, or the lump sum value of basic life insurance. The optional life insurance, if you have been carrying it, is also available in a lump sum.

What if I’ve waived QPSA and I die prior to retirement?

Your surviving spouse will only receive the choice under the Survivor Income Plan Benefit of the monthly annuity or the lump sum value of basic life insurance. There will be NO benefit from the Pension Plan. S/he will also receive any optional life insurance that you were carrying.