The Department of Labor’s Employee Benefits Security Administration has granted an exemption allowing Northwest Airlines to contribute privately held stock of a regional airline affiliate (Pinnacle Airlines) in lieu of cash to its three defined benefit pension plans for its 72,854 employees. The Employee Retirement Income Security Act (ERISA) generally prohibits in-kind contributions except under certain statutory exceptions or if the Labor Department grants an exemption. It has been reported that the Department of Labor has used its exemption authority to grant relief for similar types of transactions in the past; e.g., in 1989 to Pan Am shortly before the airline collapsed, and in 1994 to General Motors.

This exemption will mean more available cash for financially strapped Northwest. The minute I saw that announcement, I thought of Enron's 401(k) plan where many Enron employees' accounts were overloaded with Enron stock. They thought they had stock in one of the best U.S. companies, only to find out it was virtually worthless.

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