Mesaba Airlines pilots have filed a lawsuit against their employer for the mishandling of contributions to their individual 401(k) retirement plans. According to documents filed with U.S. District court in Minneapolis today, the pilots allege Mesaba withheld money from their paychecks that was earmarked for their 401(k)s, but never actually deposited the money into the pilots' retirement accounts.

"Mesaba has been deducting money from our paychecks that was supposed to go into our 401(k) accounts, but instead they've kept the money in the company's coffers," said Kris Pierson, Mesaba pilot and ALPA spokesman.

In addition, the lawsuit alleges that Mesaba failed to make all of the matching contributions required under the plan, made certain other contributions outside of the legal time limits, and did not promptly rectify these errors which date back to at least 1996.

According to the lawsuit, Mesaba's failure to identify and promptly fix the irregularities constitutes a breach of its fiduciary duties. The court filing alleges that "Mesaba knew or should have known" of its errors since under federal law Mesaba is required to engage an independent qualified public accountant to audit the plan. Mesaba is also required to publish an annual report of the Plan that includes a financial statement of the assets and liabilities of the plan.

The Air Line Pilots Association, International (ALPA), the union that represents Mesaba's pilots, learned of the funding shortfalls in late September. ALPA initially believed that the retirement plan problems could be resolved without resorting to litigation.

"Management has flatly refused to disclose even the government filings related to this matter. Without any supporting data, our pilots can not be assured that a full remedy will be provided," stated Pierson. "Moreover, we have reason to believe the funding shortfalls affect most of Mesaba's pilots and many other Mesaba employees. In some cases, pilots are owed several thousand dollars." Mesaba had promised employees that it would pay at least some of the monies owed by November 30, 2003, but it missed its own deadline.

The lawsuit filing comes just days before a possible strike by Mesaba pilots. Contract talks were declared to be at impasse by the National Mediation Board earlier this month, setting a contract-or-strike deadline of January 9, 2004 at 11:01 p.m. CST.

Retirement benefits are a sticking point in contract negotiations for the Mesaba pilots who retire with 25-30 percent less in their retirement than pilots at similar regional airlines. That issue is compounded by the union's concern that Mesaba pilots have been further disadvantaged by the contribution irregularities. "We filed the lawsuit because we need to be certain that our pilots will get back the money that they are entitled to -- and that they will need when they retire," said Pierson. Half of Mesaba's 844 pilots earn less than $32,500, with starting pay less than $17,000.

Mesaba Responds: Official Statement in Response to ALPA Lawsuit

Mesaba Aviation, Inc., a subsidiary company of MAIR Holdings, Inc. issued the following statement from its president and chief operating officer John Spanjers today, concerning the lawsuit filed by ALPA:

"Mesaba Airlines regrets the errors that occurred in certain employees' 401(k) accounts, and we have disclosed these errors to the IRS and the Department of Labor. We also have communicated to all employees the nature of the errors and our plan for both correcting them and preventing their recurrence. We believe this lawsuit is unnecessary given our commitment to correcting the errors.

"We are disappointed that ALPA deemed a lawsuit necessary at this time, because since we self-disclosed these errors, we have worked closely with ALPA to address the concerns of the Mesaba pilots -- and all Mesaba employees -- and to rectify the errors.

"In addition, the timing of this lawsuit adds another layer of distraction as Mesaba approaches the Jan. 9 deadline in its pilot negotiations."

FMI: http://mesabapilots.alpa.org, www.alpa.org, www.mesaba.com