,v~ 

PBGC

Protecting America's Pensions 

Pension Benefit Guaranty Corporation 

1200 K Street, N.W., Washington, D.C. 20005-4026 

October 4, 20l3 

~~~-- .... ~ :-·.''•.•.::'.->'1::·-·.·;,, '•<,/ 

,·-···~··r!"'...~····"· !,.-:: •• · .. ~.:-·. 

Re: No. 205441, Delta Pilots Retiremen~ Plan (the "Delta Plan" or 

"Plan") 

DearWe have reviewed your individual appeal ofPBGC's August 22, 2011 determination that you 

are not entitled to a PBG~ benefit. Your appeal contended that PBGC's calculation of 

your benefit under" your --1995 Qualified Domestic Relations Order ("QDRO") was 

incorrect. For the reasons explained in this decision, we found that PBGC's determination is 

correct under federal pension law. Thus, we are denying your appeal. 1 • 

PBGC's Determination and Your Appeal 

PBGC's- 2011 determination letter stated that you are not entitled to a PBGCpayable benefit because you received the variable annuity portion of your Plan benefit as a lump 

sum when you retired. That lump sum exceeds the maximum benefit PBGC can guarantee; thus, 

you have received your full guaranteed benefit and no additional benefit is due from PBGC. The 

letter also explained that since PBGC had been paying you an estimated benefit of $139.46 per 

PBGC must collect the overpayment of $8,507.06you received over. months (as of 

20l1). The-2011 determination included an enclosed Benefit Statement 

2011 further explaining your benefit. . We note that since you appealed your 

determination, PBGC has continued paying you the estimated monthly benefit of $139.46, and 

your overpayment balance I has increased. 

~werealso an appellant in the group appeal filed by the Washington, D.C. law firm or-. 

----on behalf of you and over 1,750 other Delta pilots and beneficiaries (the "Consolidated 

Appeal"). On January 9, 2013, we notified you by letter that, because the Consolidated Appeal had raised several 

issues that directly impacted your benefit, the Board would delay its decision of your individual appeal until after it 

decided the Consolidated Appeal. On September 27, 2013, the Appeals Board issued its decision on the 

Consolidated Appeal; a copy of the Board's "Consolidated Appeal Decision" (with minor redactions to protect 

personal privacy) can be found http://www.pbgc.gov/documents/apbletter/Decision--Delta-Pilots-Retirement-Plan2013-27-09.pdf. 
You submitted an appeal on April ~3, 2012 objecting to PBGC's determination of your 

·benefit and the Alternate Payee's ("AP's") benefit under a Qualified Domestic Relations Order 

("QDRO) applicable to your benefit. You supplemented your appeal on May 16, 2012.2 Your 

appeal correspondence raised two distinct issues. 

Appeal Issue #1- Whether PBGC's Methodology for Calculating Your Benefit is Flawed 

~ ,; . ·.. ..~~-' -....,.. ... .........• , ... -..- .. •: .....-. 
 ·.-<:-<:"11!::.21£:.~:·· ··-:.;·.- •.•• ._ ··--·,":::::·l.'!r···-• ., .· .•. •;-.... · 

The primary concern raised by your appeal is the manner in which PBGC has determined 

your benefit and the AP's benefit. You assert that PBGC's reduction of your total tax-qualified 

monthly benefit by 15%, from $9,600 to $8,160, should be applied equally to your benefit and 

the AP's benefit. You contend that PBGC improperly applied the entire reduction to your . 

benefit. 

To support your arguments, you asserted that your QDRO is a "fixed percentage" QDRO that 

PBGC is implementing as a "fixed-dollar" QDRO. You also asserted that PBGC's manner of 

determining the maximum guaranteed benefit in a pro-rata manner (43% to AP and 57% to 

participant) reflects that PBGC already accepts your QDRO as a "fixed percentage" QDRO. 

You believe PBGC should follow this method and apply the reduction as a percentage to both 

you and the AP. 

You also cite the "PBGC Guidelines" you obtained from the "QDRO booklet" on PBGC's 

website to support your argument. You are concerned in particular with the following excerpt 

from the QDRO booklet: 

In general, if a QDRO awards a fixed percentage of the participant's benefit 

payment to the alternate payee and provides no guidance on apportioning between 

the participant and alternate payee any benefit adjustments made by PBGC, 

PBGC will adjust their benefits pro rata. 

In summary, you contend in your appeal submissions of April 23,2012 and May 16,2012 that 

PBGC's methodology for calculating your benefit is flawed, and PBGC has erroneously favored 

the AP, inconsistent with terms of the QDRO and PBGC's own QDRO guidelines. We have 

identified this claim as Appeal Issue #1. 

Appeal Issue #2 - Whether the AP 's Lump-Sum Distribution 

Was Incorrectly Calculated by Delta 

Your first submission on April 23, 2012 also raised a separate, distinct issue: 

The PBGC should not have accepted the lump sum distribution amount awarded 

the AP by Delta prior to the bankruptcy in their calculations. I believe that this 

sum was incorrectly calculated by Delta and is an overly inflated figure, which 

has contributed significantly to the reduction by the PBGC of my own fixed 

benefit to $0. 

2 The Board considered your individual appeal timely-filed because it was submitted while the timely-filed 

Consolidated Appeal was still under the Board's review. 

2 

•••• ••• .~.· • ;-,....'!. ... "·' 

We have identified this issue as Appeal Issue #2. 

In the "Background" section of this decision we discuss the Plan's termination and the 

undisputed facts in your case. In the "Discussion" section, we address the methodology PBGC 

used to calculate your PBGC-payable benefit and the two issues raised in your appeal. ...... f • 	 ·------ •'·· !, ­

Background 

PBGC and the Plan's Termination 

PBGC is the United States government agency that insures pensions in accordance with Title 

IV of the Employee Retirement Income Security Act of i 974, as amended ("ERISA"). If a plan 

sponsor is unable to support its defined benefit pension plan, PBGC becomes the trustee of the 

plan. PBGC pays pension benefits according to the terms of the Plan, the provisions of ERISA 

and the Internal Revenue Code ("IRC"), PBGC regulations· and policies, and the terms of any 

applicable QDROs. 

The Delta Plan terminated on September 2, 2006, without sufficient assets to provide all 

benefits under the Plan, and PBGC subsequently became trustee. When the Plan terminated, you 

had already received ·a lump-sum distribution of 50% of your benefit, and you were receiving a 

tax-qualified monthly Plan benefit of $1,295.07. Because of legal limits under ERISA and 

PBGC's regulations, the benefits PBGC guarantees may be less than the benefits the Delta Plan 

would otherwise pay. 

Undisputed Facts and Timeline 

The Board determined the following facts and timeline are not in d,ispute: 

• 

• theAP. ·

• 	 1972 - You were (Your pilot seniority date was

1972). 

• 	 January 1, 1995- Your divorce effective. 

o 	 Your accfll:ed Plan benefit as of January 1, 1995 was $7,274; your Plan benefit 

was 100% tax-qualified because it did not exceed any IRC legal limits. 

• 	 1995 - A separate interest QDR03 was entered in the District Court of 

assigning the AP a 50% interest in your Delta Retirement 

Plan age-60 benefit accrued through January 1, 1995. (The QDRO stated that your 

accrued Plan benefit as of January 1, 1995 was $7,274.) 

• - 2003 - You retired and commenced your Plan benefit. The AP also elected to 

commence her benefit on the same date. 

' o _Your tax-qualified Plan benefit was $9;600 before reducing for the AP's 

separate interest. 

3 A further discussion of why your QDRO is a "separate interest" QDRO is at Enclosure I. 

3 
o 	 Under the terms of the Delta Plan, a participant or AP could elect to take one-. 

half of the total benefit (the Variable Annuity portion) as a lump-sum 

distribution. Both you and the AP elected to take a lump-sum distribution of 

half of your respective benefits. 

The AP's lump-sum distribution was $265,413.61. . 

Your lump-sum distribution was $853,687.34. 

o 	 The AP's remaining one-halfportion,of.her·benefit (the Fixed Annuity portion) 

was 1 00% tax -qualified. 

o 	 Your remaining one-half portion of your benefit (the Fixed Annuity) was only 

partially tax-qualified and was payable to you as follows: 

$1,295.07 payable from the Plan as a tax-qualified monthly benefit; and 

$3,825.72 payable from the non-tax-qualified Delta Supplemental Annuity 

Plan ("SAP"). 4 

• · September 2005- Delta entered bankruptcy and payments under the SAP stopped. 

• September 2, 2006- The Plan terminated. You were age 61 andllmonths old. 

o 	 Your tax-qualified monthly Plan benefit at Plan termination ,was the same 

$1,295.07 benefit you had received since retiring in 2003. 

• 	 May 1, 2007- PBGC reduced your benefit to an "estimated benefit" of $139.46 per 

month. 

• 	 August 22; 2011 - PBGC issued you its initial (formal) determination that your 

PBGC-payable be~efit was $0.00. , 

• 	 ·January 9, 2013...,. the Appeals Board informed you that your individual appeal would 

be decided after the Board's Consolidated Appeal Decision, which was issued on 

September 27, 2013. 

Discussion 

Summary ofthe P BGC Methodology Used 


in Determining Yf!ur PBGC-Payable Benefit 


PBGC determined your PBGC-payable benefit in three basic steps, using the same general 

method PBGC uses for all participants ofPBGC-trusteed plans: 

1. 	 PBGC first reviewed your Plan benefit as calculated by Delta and confirmed that 


Delta's calculation was correct. You did not appeal your Plan benefit calculation. 


2. 	 PBGC then calculated your PBGC-payable guaranteed benefit. PBGC's 


Maximum Guaranteed Benefit for any participant (the "MGB") depends on the 


year the Plan terminated and is adjusted for the participant's age at Plan 


termination. In calculating your PBGC-payable guaranteed benefit, PBGC must 


account for the $853,687.34 lump-sum distribution that you received when you 


retired. Because your lump-sum distribution exceeded your MGB, you effectively 


4 The SAP was a non-qualifiedPlan used by Delta to pay benefits above the IRC § 40l(a)(l7) limit. Because the 

SAP was a non-qualified pension plan, your benefit under from the SAP was never insured by PBGC. The SAP is 

further discussed in the Consolidated Appeal Decision. 

4 

have already received your full PBGC guaranteed benefit from the Plan; thus, your 

PBGC-payable guaranteed amount is now $0.00. You did not appeal your PBGCpayable guaranteed benefit. 

3. 	 Finally, PBGC calculated your PBGC-payable benefit based on an allocation of 


Plan assets under ERISA section 4044. In your case, PBGC determined that you 


were eligible to have -assets allocated to. y.oudn Priority Categories 3 and 5. After 


taking into account your lump-sum distribution, the reduction for your AP's 


separate interest, and the assets available in the Plan for allocation in Priority 


Categories 3 and 5, PBGC determined your PBGC-payable benefit under- ERISA 


section 4044 was $0.00. 


PBGC Determined Your PBGC-Payable Guaranteed Benefit is $0.00 

The legal limits on PBGC's guarantee are explained on pages 7-8 of the Consolidated Appeal 

Decision. As explained below, the one-half portion of your Plan benefit you received' in a lumpsum payment at retirement in 2003 exceeds the amount of your Plan benefit that PBGC can 

guarantee. 

As explained in the Consolidated Appeal Decision, ERISA § 4022(b)(3) provides that 

PBGC's guarantee of a participant's plan benefit cannot exceed a specified dollar amount 

payable -in the form of a Straight Life Annuity at age 65. For plans that terminated in 2006, the 

MGB limit is $3,971.59 at age 65 in the form of a Straight Life Annuity. The $3,971.59 MGB 

limit is reduced because you were under age 65 as of the Plan's September '2, 2006 termination 

date. (You were 61 years andllmonths old when the Plan terminated.) 

In cases of QDROs, the MGB limit applies to the pre-QDRO Plan benefit, because PBGC 

cannot guarantee a benefit greater than what it would pay if the QDRO did not exist: If the 

PBGC guaranteed benefit is less than the pre-QDRO Plan benefit due to the MGB limit, the 

Participant and the AP will each receive a proportionate share of the PBGC guaranteed benefit. 

For separate interest QDROs like your QDRO, the portion of the PBGC guaranteed benefit 

payable to the AP is determined based on the "AP%."5 The remaining portion is your portion of 

the PBGC guaranteed benefit. 

We note that your appeal indicates you believe dividing the MGB limit based on the AP% 

shows that PBGC interprets your QDRO as a "fixed percentage" QDRO. In fact, the MGB limit 

is divided for all QDRO cases and concerns the division of the PBGC guaranteed benefit, not the 

QDRO benefit itself. Thus, using the AP% to determine the AP's portion of the PBGC 

guaranteed benefit is irrelevant to whether your QDRO is divided according to a "fixed 

percentage." · 

It is undisputed that you received one-half of your Plan benefit as an $853,687.34 lump-sum 

5 Under PBGC policies, the AP% is the alternate payee's monthly plan benefit as a Straight Life Annuity at your 

NRD (without adjusting for payment over her lifetime) divided by your total level plan benefit (ignoring the 

QDRO), as ofDOPT-5 (unless the QDRO split occurred after DOPT-5). 

5 

distribution when you retired, and the monthly benefit equivalent of this lump-sum amount is 

$5,120.80. The $5,120.80 monthly benefit equivalent you already received exceeds ERISA's 

MGB limit even before reducing the MGB limit for your age and the AP's portion. Thus, your 

PBGC-payable guaranteed benefit is $0.00. 

You did not appeal PBGC's determination that your guaranteed benefit is $0.00. Instead, 

your appeal focuses on the method · w.hich..·.PBG<: calculated your PC3 benefit, which is 

discussed next. 

You and the AP are Each Eligible for a PC3 Benefit 

You retired on and the AP started her separate interest benefit on the same day. 

Because you and the AP were both receiving a monthly Plan benefit ("in pay status") three years 

before the Plan terminated, you are both eligible for a benefit based on the allocation of Plan 

assets under ERISA § 4044, as explained below . . ERISA § 4044 benefits. are explained in pages 

8-9 of the Consolidated Appeal Decision. 

The six-tier asset allocation scheme under ERISA section 4044 determines how a pension 

plan's. assets are distributed among various categories of benefits when the assets are insufficient 

to pay all promised benefits. You and the AP are eligible for a Priority Category 3 ("PC3") 

benefit provided under ERISA § 4044(a)(3)(A), which provides as follows: 

(3) Third, in the case of benefits payable as an annuity­

(A) in the case of the benefit of a participant or beneficiary which was in 

pay status as of the beginning of the 3-year period ending on the termination 

date of the plan, to each such benefit, based on the provisions of the plan (as 

in effect during the 5-year period ending on such date) under which such 

benefit would be the least, 

[...] 

Both you and the AP are eligible for a PC3 benefit under ERISA § 4044(a)(3)(A) because 

both of you were in pay status (i.e. receiving your benefit) on September 2, 2003 (3 years before 

the Plan's September 2-2006termination date). Your PC3 benefit is calculated ba5ed on your 

actual retirement date 2003), using Plan provisions in effect for the entire five-year 

period prior to the Plan's termination. 

The AP's PC3 benefit is calculated se~, but in the same way, based on her benefit 

commencement date (in this case, the sam~2003 date you retired) . . 

PBGC Determined Your PBGC-payable PC3 Benefit is $0.00 

In appiying its asset allocation rules, PBGC determined that your gross PC3 benefit (before 

applying the QDRO offset) was $8,160.00. This $8,160 amount is your lowest tax-qualified Plan 

benefit under Plan provisions in effect during the five-year period prior to the Plan termination. 

Your PC3 benefit is less than your Plan benefit specifically because your Plan benefit increased 

6 

within the 5-year period prior·to DOPT due to an increase in the IRC § 401(a)(17) limit. 

Your PC3 benefit, after the QDRO offset ($3,184.13), is $4,975.87. You have, however, 

already received a $853,687.34 lump-sum distribution of your Plan benefit, equivalent to a 

monthly benefit of $5,120.80. Thus, you have already received more than a full distribution of 

your PC3 benefit, and your PBGC-payable PC3 benefit is $0.00 . 

. . ;·--.-~~-·---~·-·--r·~·- -"1·~·,.: .. 6- !""::' '1'••,.,.,....-;.. ~ •' -· ,.-. --· •• 

You are Correct that the AP 's PBGC-payable PC3 Benefit 

is the Same as her Benefit at Plan Termination 

In contrast to your benefit, the AP's separate interest benefit did not increase under changes·to 

Plan provisions and IRC limits in the five-year period prior to Plan termination; The AP's 

benefit was established (and effectively frozen) on January 1, 1995 because her benefit was 

assigned to her under a separate interest QDRO that provided her a 50% interest in your age-60 

benefit accrued through January I, 1_995, or 50% of $7,274.6 Your separate interest portion of 

the Plan benefit, however, continued to increase due to your employment with Delta following 

J ariuary 1, 1995. Your full Plan benefit is not in PC3 because changes to IRC limits in the 5-year 

period prior to Plan termination increased your tax-qualified Plan benefit. 

Thus, lik~ other retired pilots, beneficiaries, and APs whose benefits did not increase in the 5 

years before Plan termination, ·the AP's entire Plan benefit was funded in PC3. Like your 

PBGC-payable PC3 benefit, the AP' s PBGC-payable PC3 benefit is also reduced for the lumpsum distribution of her Plan benefit she received when she commenced her separate interest 

benefit. 

Issu~ #1-WhetherPBGC Correctly Calculated Your PC3 Benefit 

The Appeals Board rejects your argtiment that PBGC incorrectly calculated your PC3 benefit. 

We find that PBGC's treatment of separate interest QDRO benefits as separate benefits for the 

purpose of allocation of Plan assets under ERISA § 4044 is consistent with the terms of ERISA. 

Under ERISA§ 206(d)(3)(J), an Alternate Payee is considered a "beneficiary" for all. purposes of 

ERISA. 7 Further, the PC3 requirements in ERISA § 4044(a)(3) apply "to each such benefit" of 

a participant or a beneficiary (including an AP) who was in pay' status (retired) or could have 

been in pay status at DOPT-3. Both you and the AP were in pay status at DOPT-3. Thus, your 

PCJ benefit and the AP' s PC3 benefit are determined separately by applying the PC3 rules to 

each individual's Plan benefit. 

Your appeal asks ·PBGC to qisregard the lump-sum distribution you have already been paid 

and redistribute the AP's benefit between you and the AP. PBGC must follow the terms of the 

QDRO; thus, the Board declines to reduce the AP's benefit for the purpose of providing that 

benefit to you. 

6 Because your entire accrued benefit as of January I, 1995 was qualified and payable from the qualified Plan, the 

AP's 50% portion was also qualified and payable from the qualified Plan. 

7 ERISA § 206(d)(3)(J) states, in pertinent part, "A person who is an alternate payee under a qualified domestic 

relations order shall be considered for purposes of any provision ofthis Act a beneficiary under the plall." 

7 

Finally, we note that your appeal cites PBGC's "QDRO booklet" (available to the public on 

the PBGC's website at http://www.pbgc.gov/documents/qdro.pdf) as a reason why you believe 

PBGC is violating its own guidelines in determining your benefit. The Appeals Board rejects 

your reliance on PBGC's QDRO bookl~t as a basis for changing your determination for two 

reasons. 

- First, the "pro-rata" language in the QDRO booklet language applies to benefit adjustments 

due to ERISA's § 4022 legal limits on PBGC's guarantee. There is no guidance in the QDRO 

booklet on how PBGC allocates Plan assets and legal recoveries under ERJSA §§ 4044 and 

4022( c). These two ERISA provisions sometimes permit PBGC to pay benefits above the 

guarantee and are key ERISA provisions applicable to your case. We agree with you that the 

QDRO booklet does state a general rule that benefit adjustments will be made "pro-rata" 

between the participant and the AP, unless the QDRO specifies otherwise. This gener~l rule, 

however, does not apply to the complex statutory_ scheme that governs how PBGC allocates Plan 

assets and legal recoveries under ERISA§§ 4044 and 4022(c). 8 · ,-­

Second, PBGC provides the QDRO booklet as guidance for practitioners, participants and 

APs who intend to submit a DRO to PBGC for qualification. As the preface in the QDRO 

booklet makes clear, nothing in the booklet "takes precedence over legislation, regulations, or 

specific interpretations or rulings." The Board fmds that the statutory language in ERJSA § 4044 

requires PBGC to calculate your PC3 benefit and the AP's PC3 benefit in the manner explained 

in this decision. We fmd no conflict with the PBGC methodology for calculating your PC3 

benefit and our examination of the general guidance in the QDRO booklet. 

In summary, PBGC must follow the terms of ERISA, PBGC's regulations, and the QDRO in 

paying benefits to participants and APs. In your case, the QDRO provided no instructions on 

-how benefits should be adjusted in the event the Plan terminated and PBGC became trustee of 

the Plan. You _and the AP are eligible for PC3 benefits because you were both in pay status three 

years before the Plan's termination. _Because you have a separate interest QDRO, PBGC 

properly treated your benefit and the AP's benefit as separate benefits in calculating your 

respective PC3 benefits, as required by the plain language in ERJSA § 4044. 

For the reasons discussed above, the Appeals Board has concluded that PBGC's methodology 

in calculating separate PC3 benefits for you and the AP was proper and required under _ERISA. 

Thus, your Appeal Issue # 1 is denied. 

Issue #2 - Whether the AP 'sLump-Sum Distribution Amount is Correct 

Your Appeal Issue #2 alleges that the $265,413.61 lump sum distribution of the AP' s variable 

benefit annuity is incorrect. This claim is based on the estimates of her lump sum you received 

from Delta from 1995 to 2003. You believe "that this sum was incorrectly calculated by Delta 

Appendix B of the QDRO booklet specifically addresses DROs qualified before a plan terminated, such as your 

QDRO. Appendix B states that where a QDRO assigns a fixed percentage of the benefit to an AP, benefits will be 

reduced to both parties to reflect PBGC guarantee limitations (emphasis added). Nothing in Appendix B or 

elsewhere in the QDRO booklet addresses how PBGC will allocate Plan assets and legal recoveries under 

ERISA §§ 4044 and 4022(c). 

8 


8 
and is an overly inflated figure, which has contributed significantly to the reduction by the PBGC 

of [your] own fixed benefit to $0." · You provided no evidence to support your claim that the 

AP's lump-sum distribution was wrong. 

Both you and the AP elected to take the Variable Annuity portion (one-half) of your benefit as 

a lump-sum payment when you commenced benefits. The Board's Actuary was able to match 

Delta's calculation otthe:AP':s·lump-sum amount exactly. Likewise, we found no error (nor did",~~2,.::' ._,.,,,.~,, .. 

you claim an error) in your lump-sum amount. Thus, your Appeal Issue #2 is denied. 

The Two Appendices Included with this Decision 

We have included two appendices as part of this decision to assist you in understanding how 


PBGC calculated your PC3 benefit and how Delta and PBGC calculated your Plan benefit. 


Decision 

Having applied the terms of the Plan; the provisions of ERISA and PBGC's regulations to the 


facts in this case, the Appeals Board found that your appeal did not provide a sufficient basis for 


changing PBGC's determination. We must, therefore, deny your appeal. 


Under its policies, PBGC has continued to pay you your estimated monthly benefit amount 


because you filed an appeal. Accordingly, your overpayment balance has grown. As a result of 


this decision, PB.GC will recalculate your total overpayment amount and inform you how you 


may repay PBGC. 


This decision is PBGC's final agency action regarding PBGC's August 22, 2011 


determination of your benefit under the Delta Plan. If you wish, you may seek court review of 


this decision in an appropriate federal district court. If .you have other questions about your 


PBGC benefit, you may call PBGC's Customer Contact Center at 1-800-400-7242 and ask to 


speak to the authorized representative assigned to the Delta Plan (Case 205441). 


Sincerely, 

~~~~· Member, Appeals Board 

cc: 

Appendix A: Your PC3 Benefit Calculation Under ERISA § 4044 (1 page) 


Appendix B: Delta's Calc_ulation of Your Plan Benefit (4 pages) 


9 
···· APPENDIX A: Your PC3 Benefit Calculation Under ERISA§ 4044 · 

A 

B 

c 

D 

E 

F 

G 

H 

I 

J 

Pension Calculation Data 

"'"of' • •~: "­ • 1,.- .....,, "'· r • • :-...!'"'j,! 

Retirement Date 

Years of Credited Service · 

FAE 

(capped by IRC § 401(a)(l7))1 

Tax-Qualified Benefit at NRD 

(0.6 XC X (B725, no greater than 

1.0)) 

Early Retirement Factor 

Tax-Qualified Benefit at Retirement Date 

(D X E) 

Reduction for AP's Benefit 

Your Remaining Qualified Benefit After 

the QDRO (F- G) 

Your Tax-Qualified Variable Annuity, 

Paid as a Lump Sum at Retirement (50% 

of Total Formula Benefit at Retirement 

Date) 2 

Your Remaining Tax-Qualified Fixed 

Annuity: (H -I, no Jess than $0) 

Plan Benefit 

(using Plan provisions in 

effect at Plan termination) 

PC3 Benefit 

(using Plan provisions in 

effect 5 years prior to Plan 

Tenniqa.t!9.!1):.:::....::';· ·<·': ;:::....... 

-2003 

30.41667 

$16,666.67 

$10,000.00 

0.9600 

$9,600.00 

$3,184.13 

$6,415.87 

$5,120.80 

$1,295.07 

-2003 

I 

30.41667 

$14,166.67 

$8,500.00 

0.9600 

$8,160.00 

$3,184.13 

$4,975.87 

$5,120.80 

$0.00 

' 

1 See discussion ofthe IRC §40 1 (a)(17) limit in the Consolidated Appeal Decision at pages 12-22. 

2 See Appendix B for the calculation of your Total Formula Benefit and your Tax-Qualified Variable Annuity that 

was paid as a lump-sum distribution. 
APPENDIX B: Delta's Calculation of Your Plan Benefit 

Your Formula Benefit and Your Tax-Qualified Benefit at Your Retirement Date 


Before the QDRO Offset 


Your Formula Benefit is "the ratio of [your] Credited Service to 25, with a maximum ratio of 

1.0 .!i!!l£~..,q.Q,~.::<~.f":[your] Final Average Earnings ['FAE']"· and is reduced fq:r!i~h;,·!?il;lyfit 

commencement. See Section 1.18 of the Plan. You earned 30.41667 years of service, your F AE 

was $23,308.55, and your tax-qualified FAE (using your earnings up to the IRC § 401(a)(l7) 

limit in effect on your retirement date) was $16,666.67. Your Formula Benefit and your taxqualified benefit are then reduced by an early retirement factor of 0.9600 because you retired 16 

months early, o~2003Y 

How Your Plan Benefit is Calculated (Part 1 of 3) 

Type of Benefit 

Formula Benefit 

( earriings not capped 

by IRC § 401(a)(17) 

limits) 

Tax-Qualified Plan 

Benefit (earnings 

capped by IRC § 

401(a)(17) limits) 

A FAE $23,308.55 $16,666.67 

B Monthly Benefit: [0.6 X A x 

(CS + 25, no greater than 1.0)] $13,985.13 $10,000.00 

c 

Adjusted for Early Benefit 

Commencement: 

(B X 0.9600) 

$13,425.72 $9,600.00 

The QDRO Offsets to Your Formula Benefit and Your Tax-Qualified Plan Benefit 

According to the QDRO, the Plan benefit payable to the AP is a benefit equal to 50% of the 

vahie of the participant's age-60 benefit as of January 1, 1995 (assuming AP benefits commence 

at the participant's age-60). The QDRO also states that 100% ofsaid benefit is $7,274. 

Delta determined that your age-60 Formula Benefit as of January 1, 1995 was $7,274.68 and 

that it was 100% tax-qualified because it did not exceed the IRC §§ 401(a)(17) and 415(b) limits. 

The QDRO assigns 50% ofthe January 1, 1995 Formula Benefit to the AP starting on her elected 

benefit start date, actuarially adjusted for her early retirement and the age difference between you 

and the AP. Your QDRO offset is calculated as her 50% portion of the Formula Benefit, 

actuarially reduced to yo~ 2003 retirement date. 

The Board reviewed your benefit accrued as of the January 1, 1995 division date using 

Delta's data for y.ou at tqe division date. Delta determined your highest 36-month period of 

earnings was between April 1, 1991 and March 1, 1994, and calculated your Final Average 

11 You retired on-2003, 16 months before your NRD. Plan§ 5.02 provides for a 

participant's monthly benefit to be decreased by 0.25% for each complete month by which the date of actual 

retirement precedes NRD at age 60, for a total of 4%. Thus, the Plan's early retirement factor of 0.9600 applies to 

your benefit. 
Earnings ("F AE") as $13,673.70. Delta also determined thatyou had earned 22 years and 2 

whole months of service at the division date. your January 1' 1995 benefit is calculated under 

the same formula as your Plan benefit at retirement, using an FAE of $13,673.70 and 22.1667 

years of credited service. As shown .in the table below, your Formula Benefit as of January 1, 

1995 is $7,274.68. 

, . . ... How the AP's Plan Benefit is Calculated Under the -QDRO:~ •.. -'·"-'' ·o- . ~ : -· .. ... ~- -­

Total age-60 monthly benefit 

(a.k.a. Formula Benefit) 

= 0.60 x Final Average Earnings ("F AE") x ratio of years of service 

to 25 (up to 1.0) 

Data as of January 1, 1995 FAE: $13,673.70 (April 1991 through March 1994) 

Years of service : 22 years and 2 whole. months (22.1667 years) 

Formula Benefit as of 

January 1, 1995 

= 0.60 X $13,673.70 X (22.1667 + 25) 

= 0.60 X $13,673.70 X (0.8867) 

= $7,274.68 

AP's portion =50% of Formula Benefit as of January 1, 1995 

= 0.50 X $7,274.68 

= $3,637.34 

It appears that the QDRO rounded down your Formula Benefit as of January 1, 1995 from 

$7,274.68 to. $7,274.00. In calculating your benefit, however, Delta used your actual January 1, 

1995 Formula Benefit of $7,274.68. Thus, the value of the AP's monthly benefit is $3,637.34 

(50% of $7,274.68). Your QDRO offset 'at your Normal Retirement Date ("NRD") is this 

$3,637.34 amount. Based on the above calculations, the Board is accepting as correct the 

3~637.34 amount (50% of$7,264.68) assigned to the AP. 

The AP's monthly benefit payment is actuarially reduced if she commences benefits prior to 

your NRD, and it is actuarially further adjusted to be payable over her lifetime. 12 Her monthly 

benefit payable over your lifetime beginning at your attainment of age 60, however, is fixed at 

3,~37.34. The AP is not entitled to any benefit increases after January 1, 1995, even though 

you remained an active-pilot and continued to accrue pension benefits with Delta. 

How Your Plan Benefit is Calculated (Part 2 of 3) 

Type of Benefit 

Formula Benefit 

(earnings not capped 

by IRC § 401(a)(17) 

limits) 

Tax-Qualified Plan 

Benefit (earnings 

capped by IRC 

§ 401(a)(17) limits) 

D Your NRD Benefit Accrued as of 

January 1, 1995 $7,274.68 $7,274.68 

E AP's Portion: (50% ofD) $3,637.34 $3,637.34 

F Actuarial Equivalent Factor to 

Account for Your Early Retirement 0.87540 0.87540 

G The QDRO Offset at Your 

Retirement Date (E x F) $3,184.13 $3,184.13 

H Your Benefit at Your Retirement 

Date After QDRO Offset: (C ­ G) $10,241.59 $6,415.87 

12 These adjustments, because they are actuarial in nature, do not affect the QDRO offset to your benefit. 

2 

You and the AP Elected to Receive Lump-Sum Distributions 

ofYour Variable Annuity Benefits 

The Formula Benefit is payable in two components, with one-half payable as a variable 

annuity, and one-half payable as a fixed annuity. Participants and APs could elect to receive the 

entire variable annuity portion of their Formula Benefit as a single lump-sum distribution. As 

:,..,.·;;..;;c:,:,;;;;.;;:·JeqJ.I!re.G by Plan terms, these variable annuity lump-sum distributions ·nece~sarily consisted 

entlreiy oftax-qualified funds. 

Both yqu and the AP each elected to_ receive tax-qualified lump-sum distributions of your 

variable annuity benefits. You received the entire value of your $5,120.80 variable annl!itymonthly benefit (50% of $10,241.59) as a tax-qualified lump-sum distribution in the amount of 

$853,687.34. The AP received the entire value of her variable annuity benefit as a lump-sum 

distribution in the amount of$265,413.61. 

The remaining one-half of the Formula Benefit after your lump-sum distribution is the 

fixed annuity benefit. In contrast to the variable annuity benefit that was paid entirely from·the 

tax-qualified Plan, the fixed annuity benefit was paid from both the tax-qualified Plan and the 

non-tax-qualified Supplemental Annuity Plan ("SAP"). 

Your Fixed Annuity Benefit Payable from the SAP 

The portion of your fixed annuity benefit that results from earnings exceeding the IRC 

§ 40l(a)(17) limits is non-tax-qualified and payable from the SAP. Your SAP benefit is simply 

the difference between your total fixed annuity and your tax-qualified fixed annuity, as shown in 

the table below. The AP is not entitled to any SAP benefits. Delta stopped paying all SAP 

benefits to retirees after September 14, 2005 due- to its bankruptcy. The SAP terminated on 

September 2, 2006, the same day as the Plan, but PBGC does not guarantee any benefits payable 

from the SAP. 

How Your Plan Benefit is Calculated (Part 3 of 3) 

Type of Benefit' (after QDRO offsets) 

I Total Variable Annuity, 100% Tax-Qualified: 

[50% of (Formula Benefit in H)] $5,120.80 

J Total Fixed Annuity: 

[(Formula Benefit in H)-I] $5,120.79 

K Tax-Qualified Fixed Annuity: 

[(Tax-Qualified Plan benefit in H)- I)] $1,295.07 

L Non-Tax-Qualified Fixed Annuity/SAP benefit: 

(J -K) $3,825.72 

3 

Your MPPP Offset is Applied Against Your SAP Benefit 

When you retired, you received a lump-sum distribution of your Money Purchase Pension 

Plan ("MPPP") benefit in the amount of $76,907.94. Delta provided PBGC with the MPPP 

account balances-distributed at retirement. PBGC calculated the monthly annuity equivalent of 

the MPPP account balance distributions to be used as an offset in the calculation of your SAP 

~"~:.;::;,·.-;;~-"·"·'',::·,~

·---

;"_~d Delta Plan benefits. The monthly annuity equivalent oLy.our.MPP::P· ~istribution is $497.92. 

Your MPPP offset is applied in full against your non-tax-qualified SAP benefit. No MPPP offset 

remains to be applied against your tax-qualified benefit, as shown in the summary of your plan 

benefit on the following page. · 

Summary of Your Plan Benefit 

Type of Benefit 

Total Plan Benefit 

Prior 

to QDRO Offset 

QDRO Offset 

Benefit 

Payable to 

You 

A Gross Formula Benefit (Earnings not 

capped by IRC § 401(a)(17) limit) $13,425.72. $3,184.13 $10,241.59 

B 

Tax-Qualified Formula Benefit 

(using Earnings capped by 

IRC § 401(a)(17) limit) 

$9,600.00 $3,184.13 $6,415.87 

c Tax-Qualified Variable Annuity: 

(50% of A) $6,712.86 $1,592.06 $5,120.80 

D Lump Sum of Variable Annuity in 

(C) $1,119,100.95 $265,413.61 $853,687.34 

E Fixed Annuity: (A - C) $6,712.86 $1,592.07 $5,120.79 

F Tax-Qualified Fixed Annuity: 

(B-C) $2,887.14 $1,592.07 $1,295.07 

G Non-Tax-Qualified Fixed Annuity = 

SAP Fixed Annuity: (E- F) , $3,825.72 $0.00 $3,825.72 

H MPPP Lump Sum (as a Mon.thly 

Benefit Equivalent) $497.92 $0.00 $497.92 

I Remaining SAP Fixed Annuity after 

MPPP Offset: (G- H) $3,327.80 $0.00 $3,327.80 

J 

Total Tax-Qualified Monthly 

Benefit: 

(C+F) 

$9,600.00 $3,184.13 $6,415.87 

K Total.MPPP and SAP Benefits: 

(H+ I) $3,825.72 $0.00 $3,825.72 

L Gross Monthly Benefit: (J + K), also 

equal to (A) $13,425.72 $3,184.13 $10,241.59 

4