UNDERSTANDING OFFSETS TO LONG TERM DISABILITY (LTD) BENEFITS: A number of disabled pilots do not fully understand how their LTD benefits are determined or how offsets are applied to their LTD benefits. Hopefully what is written on this page will be helpful. LTD benefits are not correctly characterized as a disability pension because they are paid from what is known as a "Welfare Benefit Plan" rather than a pension plan.
THE LTD BENEFIT BEFORE OFFSETS: The LTD benefit is calculated as 50% of the average of the highest of 12 consecutive months of earnings out of the last 36 months of earnings prior to the disability Event Date. One half of the initial LTD benefit is fixed and the other half has a variable feature that can increase over time. The variable portion can never be less than the initial amount. There are pre-retirement offsets that are applicable in cases of disabled pilots who remained on the seniority list after June 1, 2006; however, disabled pilots who no longer were on the seniority list after June 1, 2006 generally were not subjected to pre-retirement offsets to their LTD benefits.
RETIREMENT OFFSETS: The D&S Plan specifies a dollar for dollar reduction in the LTD benefit for the amount of benefits actually paid or on account of the pilot from Delta pilot retirement plans (including amounts now paid by the PBGC relating to the terminated Delta plan and Delta pilot retirement benefits paid under a Qualified Domestic Relations Order to an ex-spouse). If the pilot received lump sum distributions (Delta Pilots Retirement Plan and/or the Money Pension Purchase Plan) or if he elected to receive benefits in the form of a joint life and survivor annuity, the equivalent value of a single life annuity serves as the appropriate offset to the LTD benefit. Delta calculates the offsets and combines them into one figure. Until recently that figure was indicated as SLA (representing Single Life Annuity value) on the D&S Trust pay stub. It now is indicated as PENIONOFFS which is assumed to mean pension offsets.
OFFSETS RELATING TO THE TERMINATED NON-QUALIFIED RETIREMENT BENEFITS: Prior to the Delta bankruptcy, non-qualified retirement benefits (those that exceeded federal limitations for qualified benefits) were paid from the Supplemental Annuity Plan or the Bridge Plan. As soon as Delta filed for bankruptcy, payment of the non-qualified benefits ceased. A settlement was reached between DP3 and Delta under which the value of non-qualified benefits over the remaining expected lifetimes of retired pilots were processed as claims for compensation in bankruptcy proceedings. That settlement agreement also specified that disabled pilots were excluded from the claim to the extent that their loss of benefits was made up under the D&S Plan. For example, if a disabled pilot lost $1,000 in non-qualified retirement benefits and that $1,000 loss no longer was applied as an offset to his LTD benefit, the disabled pilot did not receive a claim under the non-qualified settlement.
WHAT IS THE SIGNIFICANCE OF THE NON-QUALIFIED SETTLEMENT: Essentially the non-qualified settlement codified the concept that the LTD benefits of pilots who no longer were on the seniority list after June 1, 2006 extend for their remaining lifetimes because they were excluded from a lifetime settlement.
TERMINATION OF THE DELTA PILOTS RETIREMENT PLAN (DPRP): When the DPRP was terminated and turned over to the PBGC, many disabled pilots experienced a reduction in qualified benefits. That loss of benefit no longer was applied as an offset to the LTD benefits; therefore, LTD payments were increased accordingly. Future increases or decreases in benefits paid by the PBGC necessitated appropriate corrections to the LTD benefit.
SOCIAL SECURITY OFFSETS: Although the Delta Pilots Retirement Plan specified a Social Security related reduction to the retirement benefit, the D&S Plan does not include such a provision. Accordingly, when the retirement benefit (now paid by the PBGC) is reduced by the Social Security offset, the amount of the retirement offset to the LTD benefit should be reduced. The result is that the Social Security offset to the retirement benefit should be accompanied with a corresponding increase in LTD payments.
OVER-PAYMENTS FROM THE D&S PLAN: In a number of cases increases in the PBGC benefit were not promptly accompanied with a correction to the offset to the LTD benefit. The resulting over-payment of LTD benefits eventually led to a correction under which the pilot was required to repay the D&S Plan. Repayment was allowed over a 48 month period without the charge of interest. Tax ramifications of the repayment were addressed in an article that can be read by clicking on the blue button near the top of this page labeled D&S PLAN
Although the information on this page is believed to be accurate, no warranties are made or implied as to the accuracy of the information.
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Net LTD payment