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Posted on 09/15/2004 7:58:06 AM PDT by mondoman
The nation's pension insurer said Tuesday it will guarantee basic pension benefits to employees and retirees at United Airlines and US Airways if their plans are dissolved, but it said the potential terminations point to a need for legal reforms.
The Pension Benefit Guaranty Corp., a quasi-governmental agency, said it plans to ask Congress to revise the federal bankruptcy laws so workers' pensions are more secure.
The PBGC will propose such changes as allowing workers' pension claims to trump claims by unsecured creditors in bankruptcy-court proceedings. It also will call for companies to notify workers about the health of their pension plans within 30 days of a bankruptcy filing.
The agency "will protect workers' pensions, but we must have the tools going forward to require companies to meet their obligations," Executive Director Bradley Belt said in a statement. "We need fundamental reforms to improve the financial health of the defined-benefit pension system, to protect participants' benefits and to shore up the federal pension insurance program."
UAL Corp.'s United, Denver's biggest airline, has said it likely will terminate its four pension plans, which cover 120,000 workers and retirees, to become a viable business. The carrier plans to skip $400 million in contributions due to its plans today. The plans are underfunded by $8.3 billion.
If United sheds the plans, the -PBGC will cover $6.4 billion, or 77 percent, of the funding gap. The rest, $1.9 billion, would represent the loss for participants because the benefits exceed congressionally mandated caps on guarantees.
US Airways filed for its second bankruptcy in 25 months this week and warned it might kill pension plans for flight attendants, bag handlers, mechanics and others. It terminated its pilots' pension plan in its first bankruptcy.
Fears are rampant that pension- plan terminations at United and US Airways could prompt other major airlines, such as Delta, to eliminate their plans, increasing the liabilities for the pension agency.
The agency has said its liabilities already exceed its assets by about $10 billion.
On Tuesday, The New York Times reported that an independent analysis suggests the agency will run out of money in 2020 if the current financial situation continues.
Pension experts are concerned the PBGC might require a massive bailout from taxpayers in order to continue sending checks to retirees.
The PBGC was formed 30 years ago. It receives no funds from general tax revenues. It finances its operations from insurance premiums paid by companies that sponsor pensions and investment returns.
The agency is run by a board that includes the U.S. secretaries of Labor, Treasury and Commerce. Since its creation, the airline and steel industries have accounted for more than 70 percent of the claims against the program while representing less than 5 percent of insured participants, according to the PBGC.
Also Tuesday, Rep. John Boehner, R-Ohio, who is chairman of the House Committee on Education and the Work Force, outlined a list of ideas for pension reform in a speech at the U.S. Chamber of Commerce.
He said Congress should require companies to fully fund their plans; it should implement a permanent interest rate to accurately calculate funding promises; employers shouldn't make promises to workers they can't keep; and workers should be given more accurate and timely disclosures about their plans' health.
"Unfortunately, the federal rules governing defined benefit plans are badly outdated," he said.
Pension plan costs
• The plans: UAL Corp. has four pension plans that cover 120,000 workers and retirees.
• Deadline today: The carrier has said it plans to skip $400 million in contributions due today. The plans are underfunded by $8.3 billion.
• What's next: If United terminates the plans, the Pension Benefit Guaranty Corp. will cover $6.4 billion of the funding gap. The rest, $1.9 billion, would represent the loss for participants.
kesmodeld@RockyMountainNews.com or 303-892-2514. News wire services contributed to this report.
Pension experts are concerned the PBGC might require a massive bailout from taxpayers in order to continue sending checks to retirees.
BOHICA. The federal pension guarantee "fund" is similar to the social security fund. There isn't anything in it other than a claim on the U.S. taxpayer.
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Yeah, good eye candy.
However, the issue is gaining traction. I read several articles in the Wall Street Journal last week about the PBGC.
When combining the Social Security shortfall in 2018, with the demise of defined benefits and the dearth of private savings in IRA's/401(k) and the aging population, we have an impending 'perfect storm'. I even hear tell of an impending 'real estate buble' -- really scary when you consider the high percentatage of 2nd mortgages due to home equity loans.
My liberal NYC sister sent me the URL for the MSN published article from one of her HS friends - a (now retired) United Stewardess - who is most likely getting ripped off by those who promised and contracted and oversaw her pension - That includes the fed pension agency since the 1970s -
The United debacle, possible Ford, GM, and other looming mega-corp pension looting while 3 months to 3 year CEOs grab and go with guaranteed mega-millions platinum parachutes will really catch the eyes of the young ones and their parents and grandparents facing their monthly pension checks cut in 1/2 after many years of work will put a different complexion on the Social Security reform and highly diversified investment agenda -
Well, the "under-the-table" illegal aliens will not have to worry about pensions - since they kept all their pay - all let the American suckers pay for all the bennies and freevies we pay for ourselves - And now for them and their huge families also -
bump for later
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