Bankruptcy Code Section 1114 gives the retirees key procedural and substantive protections, requiring the company in bankruptcy to make a proposal on health benefit changes and to provide reasonable information to evaluate the proposal. As consultants to the Section 1114 “Committee,” qualified actuaries experienced in group benefits play the role of interpreting the offers of the bankrupt company to the retirees who were promised benefits under earlier arrangement, and assisting the lawyers in evaluating the proposal against applicable fairness standards and other alternatives.

Actuaries for the Committee have the ability to assist the attorney and the Committee in a variety of ways, some of which result in unexpected, yet favorable, results. At minimum, the actuaries retained by the Committee are a second set of “eyeballs” to analyze the funding and financing of health care benefits and the impact of proposed changes. We had first-hand experience in advising the court-appointed committee of non-pilot retirees in the 2005 Delta Air Lines bankruptcy.

The degree of success in utilizing an actuary hinges on more than his previous experience and analytical skills. The actuary must display compassion for the retirees represented by the Committee, understanding that they are dealing with promises that must be broken because there is no longer sufficient money to back up the promise. We believe we played a critical role in allowing the Committee to reach an excellent compromise agreement with Delta, preserving critical health benefits under very difficult circumstances.