Lufthansa Moves from Pension Plan to DC Plan for Pilots

German airline Lufthansa has reached a comprehensive labor contract agreement with its pilots’ union, Vereinigung Cockpit, that includes converting from a defined benefit to a defined contribution pension system.

“This is not only the end of the longest collective bargaining dispute in our company’s history, it also creates a sustainable deal that will last until 2022,” said Bettina Volkens, head of legal affairs and human resources at Lufthansa.

The agreement provides a one-time balance sheet reduction through the conversion of the pension schemes. In return for the cost-reducing elements of the agreement, Lufthansa agreed to allow at least 325 of its planes to be staffed by pilots on the new collective agreement, which runs until June 2022. Lufthansa has also scrapped plans to staff 40 newly acquired aircraft outside the group-wide collective bargaining agreement.

A reciprocal agreement to refrain from industrial action for the duration of the talks has also been reached, and is set to be formalized in a collective bargaining agreement that extends until 2022. Additionally, the deal calls for the gradual increase of the retirement age for transitional benefits to 60.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

“The change in the pension system for our cabin crews, which we now also agreed on for our cockpit crews, has had a sustainable positive effect, strengthening our balance sheet and making us less dependent on volatile interest rate developments,” said Lufthansa Chief Financial Officer Ulrik Svensson. “This shows how important it is to have viable and forward-looking collective labor agreements.”

According to Lufthansa’s annual report, the contribution of €600 million ($645 million) that was made annually in the past to fund German pension liabilities was suspended in 2016, and will be used to implement new wage agreements in 2017. It also said that contributions to the German defined-contribution program of €1.9 billion are planned for 2017.

The airline said that more details of the collective bargaining agreements are to be agreed on during the year.

By Michael Katz

Pat Robertson, the executive director of the Public Employees’ Retirement System (PERS) of Mississippi, has announced that she is stepping down next year, and a new law could help the system become more competitive at attracting a replacement.

“I am announcing my retirement as executive director of PERS, which will take place in mid-to-late 2018 following the selection of a new executive director by the Board of Trustees,” said Robertson in her resignation letter. “With that objective in mind, the board has created an ad-hoc committee to begin the search for the new executive director, and I have every confidence that they will find the right person to take the reins.”

Robertson joined PERS in 1980, and was named executive director in 2005.

The replacement stands to make more than Robertson, thanks to a new state law that provides a higher salary cap for the next director.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

According to previous Mississippi state law, no public officer, public employee, or administrator shall be paid a salary or compensation, directly or indirectly, greater than 150% of the governor’s salary. The law has since been amended to stipulate that the executive director of the Public Employees’ 1224 Retirement System, and the chief investment officer of the Public 1225 Employees’ Retirement System are exempt from this provision.

“I am confident that PERS will continue to consistently pay promised benefits to a growing population of retirees,” said Robertson, “and that the leadership will continue planning and preparing for the future.”

PERS is also holding a runoff election for one of two retiree representative positions on the PERS board of trustees after none of the candidates in the Feb. 23 election received a majority vote. Candidates for the runoff are George Dale, former Mississippi commissioner of insurance, and Philip Pepper, a former Mississippi state economist. The board will approve the election results at its April 25 meeting.

The 10-member board includes the state treasurer, a gubernatorial appointee who is a member of PERS, two PERS retirees, two state employees, and one representative each from public schools and community/junior colleges, institutions of higher learning, counties, and municipalities. With the exception of the state treasurer and the gubernatorial appointee, board members are elected to staggered six-year term.

By Michael Katz