MINNEAPOLIS -- Mesaba Airlines pilots filed a lawsuit yesterday alleging that the carrier withheld money from their paychecks that was earmarked for their 401(k) plans, but kept the money rather than depositing it into the retirement accounts.
In documents filed in US District court in Minneapolis, the pilots also allege Mesaba failed to make all of the matching contributions required under the plan, made other contributions outside of the legal time limits, and failed to promptly rectify the errors dating back to at least 1996.
Mesaba's failure to identify and promptly fix the irregularities constitutes a breach of its fiduciary duties, the lawsuit alleges.
The money missing from the retirement accounts amounts to "hundreds of thousands of dollars," said Kris Pierson, a Mesaba pilot and spokesman for the pilots' union.
Mesaba has not disclosed to the Air Line Pilots Association the exact amount of money that was withheld, Pierson said.
The retirement money in question was not money from the pilots' regular payroll checks, he said. Instead, it was money shown deducted when manual checks were cut for extra work not included in the regular payroll checks.
"Mesaba knew or should have known" of its errors, the lawsuit says, since federal law requires the carrier to engage an independent qualified public accountant to audit the plan and publish an annual report of the plan that includes a financial statement of the plan's assets and liabilities.
"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," said John Spanjers, president and chief operating officer.
"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," Spanjers said.
The union said it learned of the funding shortfalls in late September.
The union said it initially believed the problem could be resolved without litigation.
"Management has flatly refused to disclose even the government filings related to this matter. Without any supporting data, our pilots cannot be assured that a full remedy will be provided," Pierson said.
"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," Pierson said.
He said Mesaba had promised to pay at least some of the money owed by Nov. 30, but missed the deadline.
Spanjers, however, questioned the timing of the lawsuit, which comes as contract talks between Mesaba and its pilots are at an impasse and time winds down to an 11:01 p.m. Jan. 9 strike deadline. The main issue, according to ALPA, is retirement benefits. The union says Mesaba pilots retire with 25 percent to 30 percent less in their retirement accounts than pilots at similar regional airlines. Pilots are further disadvantaged by the contribution irregularities, ALPA said.
Half of Mesaba's 844 pilots earn less than $32,500, with starting pay less than $17,000.
Mesaba operates as a regional partner of Northwest Airlines, flying between smaller cities and Northwest's hubs in Minneapolis-St. Paul, Detroit, and Memphis. Mesaba serves 114 cities in 30 states and Canada.
Mesaba shares fell 56 cents, or more than 7 percent, to close at $7.28 on the Nasdaq Stock Market.