D&S TRUST

HOW LONG

WILL THE

D&S TRUST

LAST?

BACKGROUND: In order to address the questions about the D&S Trust and the security of D&S Plan benefits, we need to start with a little background about the Trust and its function. The D&S Plan specifies a Benefit Fund from which Plan benefits will be paid. The Benefit Fund may be comprised of a combination of trust funds and insurance contracts, but essentially the D&S Trust has been the Benefit Fund. The assets of the D&S Trust cannot revert to Delta or its shareholders but must be used exclusively to pay benefits to D&S Plan Participants and their Beneficiaries as well as defray reasonable costs of administering the D&S Plan. There is concern now that the D&S Trust has minimal assets which requires Delta to make contributions on a pay-as-you-go basis. One may find comfort in Delta's repeatedly stated intentions of maintaining the D&S Plan indefinitely such as articulated in a March 3, 2008 letter from Rob Kight, Delta's Vice President of Compensation, Benefits and Services (click here to read). Additional comfort may be found in the Pilot Working Agreement which specifies that Delta cannot amend or terminate the D&S Plan without ALPA's approval. That being said, many retired pilots who have battle scars from the Delta bankruptcy would feel far more comfortable if the D&S Trust was adequately funded to pay future Plan benefit obligations.

LATEST AVAILABLE FINANCIAL INFORMATION ABOUT THE D&S TRUST: Under the provisions of the Employee Retirement Income Security Act (ERISA) employers must provide participants of a plan with an annual report that summarizes the financial status of the Plan. Unfortunately, the information relating to the Plan Year that ends on June 30th is almost a year old by the time that we receive it. Delta typically mails the Summary Annual Report in mid-June that covers the Plan Year that ended on the previous June 30th. Additional details are available in the IRS Form 5500 that is filed annually. The IRS Form 5500 is due on February 15th, but Delta usually files for an extension which allows the filing to be completed no later than April 15th. The information normally is at least 10 months old by the time that we first see it.

DECLINE IN D&S TRUST ASSETS: At the time that Delta emerged from bankruptcy, the assets of the D&S Trust appeared adequate to pay all future benefit obligations. The ensuing decline in Plan Assets to approximately 21% of Plan Benefit Obligations as of June 30, 2022 is addressed in an attached article (click here to read). It is reasonable to assume that the assets of the D&S Trust declined to a minimal level by mid 2023 and that Delta will make contributions on a pay-as-you-go basis.

POTENTIAL PROBLEMS WITH PAY-AS-YOU-GO FUNDING:D&S Plan benefits have both fixed and variable components. The variable component is based upon investment performance of the Benefit Fund. Under a pay-as-you-go method of paying benefits, there most likely will not be adequate funds in the Benefit Fund to obtain reasonable investment gains. Consequently, the variable portion of the benefit is unlikely to increase and likely to decline given the formula for calculating the benefit. We are waiting to see how Delta will address this problem.

CONTRIBUTIONS TO THE D&S TRUST: The D&S Plan contains some interesting wording about contributions to the Plan. Basically, it indicates that contributions are required at periodic intervals taking into consideration the funding recommendations contained in the annual actuarial valuation of the Plan. When the D&S Plan was established in 1972, it appears that the intention was to have an adequately funded D&S Trust.

Even though Welfare Benefit Plans do not have any statutory funding requirements under ERISA regulations, it is reasonable to infer from the Plan language and the Letter of Agreement establishing the D&S Plan that the Plan was intended to be adequately funded.

Hopefully, Delta in good faith will fund the D&S Trust in a manner similar to the voluntary additional contributions that are being made to the Delta non-pilot and the former Northwest employee pension plans. During the Delta bankruptcy, the authorization of additional expenditures of $60 million annually from the D&S Trust to pay for pilot sick leave can be viewed as being essential to Delta's reorganization. Now that Delta has successfully reorganized and is prosperous, it appears fitting for those funds to be returned to the D&S Trust.

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D&S TRUST

How long will

the D&S Trust

last?