PBGC settlements

Many of the retired UAL pilots are receiving settlements from the PBGC which include (1) notification of increase of monthly benefit and (2) a lump sum notification which will be a single retroactive payment of the past 68 months since the bankruptcy.

Rollover to IRA account: The lump sum may be sent to your regular IRA rollover account without paying tax on that amount at this time. To avoid the current tax you must fill in the form provided by the PBGC and have the funds sent directly to your IRA account by the PBGC. There is not an age limitation for rollovers to IRA's from another IRA or from a qualified plan

THIS IS USALLY MY RECOMMENDATION.

Simple IRA: The 'Simple IRA' mentioned in the PBGC material is a highly restrictive employer plan NOT to be confused with a traditional IRA or a Roth IRA. You may roll your lump sum payment into either of the latter vehicles - a Roth IRA will cause you to pay the tax on the amount of the lump sum distribution.

Roth IRA: A Roth IRA is an after tax retirement vehicle. Simply stated it is a promise by the government that if you pay the tax now you won't have to pay it later. A traditional IRA states that you do not have to pay the tax now but you - or your heirs - will pay the tax later.

A basic fundamental when using a Roth IRA is that if you will be in a higher tax bracket later than you are now, a Roth may be appropriate. There are several instances in which a Roth may be right for you, however, our experience shows there are very few.

Rollover not offered: Apparently there is a threshold in which the PBGC is not offering a rollover option. As I get more information I will post it here.

Final Determination reports that owe money: There are a couple of reports that some pilots owe money rather than getting additional amounts. It is my understanding that there may be an error of what was reported to the PBGC by UAL because of a earlier computational problem having to do with ERISA. There seems to be a group working on this problem. Some information is available at http://www.rupa.org/