Defined Contribution Plan Agreement Summary

Collective Bargaining Agreement Modifications

Section 34 of our Contract will be modified consistent with the terms of the Agreement.  The Company will eliminate the Flight Attendant Defined Benefit Pension Plan and establish a Flight Attendant Defined Contribution Program (“the Plan”) with changes to the existing United Flight Attendant 401(k) Plan, effective January 1, 2006.

Eligibility

All Flight Attendants are eligible to participate in the Defined Contribution Program.  The Company will use existing 401(k) accounts for contributions to the Plan and establish new accounts for those Flight Attendants who do not currently have one.

For those Flight Attendants who are ineligible to participate in the 401(k) Plan, the Company will seek to establish similar tax deferred arrangements when it is economically and legally possible, in locations outside the United States.

• The Company will meet with AFA-CWA to discuss the results of the Company’s research on or before March 31, 2006. 
• Until alternative plans are established, or where they cannot be economically or legally established, the Company will make a cash payment to each eligible Flight Attendant in an amount equal to the Direct and Matching Company Contribution that would have otherwise been made to the 401(k) account. 
• Such cash payments will not be included when determining Considered Earnings or compensation under any other employee benefit plan maintained by the Company. 

Vesting of Current Flight Attendants

All current Flight Attendants as of January 1, 2006 are one-hundred percent (100%) vested in all Company contributions to the Plan.

Vesting of Future Flight Attendants

Future Flight Attendants will be vested for all Company contributions on the following schedule:

If these Flight Attendants leave the Company prior to being fully vested, the unvested portion of the Company contributions will be used to offset future Company paid contributions to the Plan.

Service

All service with the Company will be counted for the purposes of vesting.

Qualifying Wages (Earnings) for Contributions to the Plan

The definition of qualifying wages (Earnings) includes base pay, holiday pay, sick pay, vacation pay, overrides and premiums but excludes expense reimbursement, incentive or profit sharing payments, imputed income or other similar awards or allowances.

Company Contributions to the Plan

The Company will make a direct contribution regardless of Flight Attendant participation in the Plan and a matching contribution depending upon each Flight Attendant’s contribution to her/his Plan account. 

• The Company will make both direct and matching contributions to the Plan once a month at a minimum, and more frequently if possible.

• The initial Company contribution to the Plan will be made in a single payment as soon as practicable following the Company’s exit from bankruptcy.

Direct Company Contribution for Current Flight Attendants

Direct Company Contribution for Future Flight Attendants

For Flight Attendants who are placed on the System Seniority List after January 1, 2006, the Company will make a Direct Contribution to the Plan on the following schedule:

Company Matching Contribution 

Effective January 1, 2006, the Company will match contributions equal to 100% of the first 3% of Earnings that a Flight Attendant contributes to her/his Plan. 

Example: Flight Attendant defers 5% of Earnings each month.  Company matches first 3% by contributing an amount equal to 3% of Flight Attendant’s Earnings.

The Company will provide a “true-up” of the Matching Contribution not later than ninety (90) days following the end of the Plan Year.  This “true up” will provide Flight Attendants with flexibility in deferrals to their 401(k) account, while insuring that they receive the Company Matching Contribution equal to 3% percent of Earnings on an annualized monthly basis. 

Example: Flight Attendant defers 0% of Earnings for nine months and 12% for the remaining three months.  Company matches by contributing an amount equal to 3% of the Flight Attendant’s Earnings for the entire twelve months (assuming constant monthly Earnings).

Company Matching Contribution Transition Period

For the first six months of the year, from January 1, 2006 through June 30, 2006, all Flight Attendants will receive the Company Matching Contribution of 3% of Earnings regardless of Flight Attendant participation in the Plan.  This means that for the first six months of 2006, whether or not a Flight Attendant defers a portion of their wages into an account, the Company will contribute a total of 5% of a Flight Attendant’s Earnings to his or her Plan account.  After July 1, 2006 a Flight Attendant must contribute to the Plan in order to receive the Company’s Matching Contribution.

Automatic Deferral

Effective July 1, 2006, the Plan will automatically provide a deferral contribution equal to 1% of Earnings from every Flight Attendant who does not already contribute to her/his 401(k) Plan: 

• Flight Attendants will be given at least 45 days notice to opt out of the automatic deferral prior to the effective date.  
• A Flight Attendant may change or revoke an automatic deferral election at any time.

Flight Attendant Contributions and IRS Maximums

In addition to the Direct Company Contribution, Flight Attendants may voluntarily make contributions to their Plan accounts on a pre-tax basis to the maximum allowed by the Internal Revenue Code.  For 2006, the maximum pre-tax contributions allowed to an employee’s account are $15,000 for those under age 50, $20,000 for those who are over age 50 which includes a “catch up” contribution and $44,000 in total employee and Company contributions.

Investment of Accounts

The Company will meet annually to confer with the AFA about Plan performance and investment options in the Plan.  AFA may at its discretion exercise veto power over the selection of any fund it deems inappropriate for Flight Attendant investment.

Documentation

The Company will provide AFA with the following documentation:

1. The amended and any future amendments to the 401(k) Plan document filed by the Company with the Internal Revenue Service (“IRS”)
2. The determination letter issued by the IRS; and
3. A copy of the final 401(k) Plan document upon IRS approval of the Plan.

Settlement of Claims Related to Defined Benefit Pension Plan Termination

Litigation before the U.S. Court of Appeals of the 7th Circuit and the District Court for the District of Columbia related to the termination of the Flight Attendant Defined Benefit Pension Plan will be withdrawn.  The following MEC Grievances will also be withdrawn:

MEC 7-05 - Success Sharing
At issue was the Company changing Success Sharing formula to reflect target and maximum numbers to be the same.

MEC 6-05 - Salaried and Management Concessions
The grievance addressed whether or not Salaried and Management were contributing their allocation of concessions.  Grievance Denied by the System Board of Adjustment.

MEC 1-04 - Retiree Medical Benefits
Grievance filed prior to reaching consensual resolution to modifications to Retiree Health Benefits by Retiree Health Coalition during 1114 negotiations in the summer of 2004.

MEC 8-04 - Distribution Agreement
Filed based upon the percentage formula in the 2003 – 2009 Contract.  Subsequent modifications to the Contract in 2005 changed Distribution formula to a dollar value, consistent with the methodology used for all other work groups.

Convertible Notes

The Company will provide the issuance of UAL Convertible Notes valued at $20,000,000. More >

Profit Sharing

The Profit Sharing Program is the same plan for all employees.  The program is triggered when the Company makes $10 million in pre-tax earnings.  Of those earnings a pool of money is created consisting of 7.5% of pre-tax earnings in 2006 and 15% of pre-tax earnings in years beyond.  All employees will receive a distribution of the cash payment based on her or his Considered Earnings.

Members will decide whether to have Profit Sharing payments paid into the 401(k) Plan accounts of all Flight Attendants.  The entire group must be treated the same.  AFA-CWA will advise the Company of the decision no later than May 31, 2006.

Indemnity and Exculpation

The Company shall provide indemnification and the Court will enter an order that the negotiation and implementation related to the Tentative Agreement were products of good faith effort.

Dispute Resolution

A grievance filed by AFA-CWA alleging a violation of this Letter of Agreement shall, at the request of either party, bypass the initial steps of the grievance process and shall be processed, submitted and heard on an expedited basis directly before the System Board of Adjustment sitting with a neutral arbitrator.  Disputes covered by the Flight Attendant Retirement Board shall be handled in accordance with the terms of Section 34.

Fees

As part of the Company’s bankruptcy reorganization, United will reimburse AFA-CWA for fees and expenses as a result of the special circumstances related to negotiations of this Agreement.

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