Democrat wants Congress to block pension defaults (BONUS - CAPTION TIME!)

Yahoo News ^ | 5/13/05 | Susan Cornwell

[Libloather]

Democrat wants Congress to block pension defaults
By Susan Cornwell
Fri May 13, 5:15 PM ET

United Airlines Flight Attendants supporters protest outside the Dirksen Federal courthouse in Chicago prior to the bankruptcy hearing of United Airlines, May 11, 2005. On May 13, 2005 a Democratic lawmaker said congress should impose a six-month moratorium keeping bankrupt companies such as United Airlines from dumping their workers' pension plans onto a federal agency. A bankruptcy judge this week approved a deal between United Airlines, a UAL Corp unit, and the federal pension insurer allowing the carrier to terminate its pension plans, in the largest corporate pension default in U.S. history. (Stringer/Usa/Reuters)

WASHINGTON (Reuters) - Congress should impose a six-month moratorium keeping bankrupt companies such as United Airlines from dumping their workers' pension plans onto a federal agency, a Democratic lawmaker said on Friday.

A bankruptcy judge this week approved a deal between United Airlines, a UAL Corp unit, and the federal pension insurer allowing the carrier to terminate its pension plans, in the largest corporate pension default in U.S. history.

California Democratic Rep. George Miller worries this could lead to a rash of other defaults among struggling air carriers with acute pension woes, as well as other industries.

He and Rep. Jan Schakowsky, an Illinois Democrat, introduced legislation on Friday to stop plan terminations for six months while Congress considers what else should be done.

"I'm just worried that companies will decide right now is the best atmosphere for them to go into bankruptcy before Congress does anything," Miller said in an interview.

Under the court-approved deal with United, the Pension Benefit Guaranty Corp. would guarantee $6.6 billion of the nearly $10 billion in benefits in the airline's pension plans, meaning many of the 120,000 workers can expect pension cuts.

But the long-term solvency of the PBGC, which has a deficit of $23.3 billion, is also in question. Some pension experts worry it could ultimately need a taxpayer bailout.

Miller acknowledged that as a member of the minority party his bill for a moratorium on pension defaults faced an uphill fight, but said he would raise the issue with House Education and Workforce Committee Chairman John Boehner.

Boehner, an Ohio Republican, has been working for months on a bill to reform traditional "defined benefit" pensions, which have a fixed payout at retirement. These plans cover 44 million Americans in many old-line industries like airlines and automobiles and are underfunded by some $450 billion.

A Boehner spokesman declined to comment on Miller's proposal, but said Boehner's pension overhaul bill, to be introduced in a few weeks, was not expected to have any provisions specific to airlines.

"Obviously many of the reforms in the bill will ensure that all employers, including airlines, are better able to fund their (pension) plans," the spokesman, Kevin Smith, said.

Miller, ranking Democrat on Boehner's committee, worries these reforms may not come in time to stop more defaults.

"You could have hundreds of thousands of workers impacted before Congress could get around to writing legislation to help secure these pensions," he said.

The Bush administration in January proposed that companies with defined benefit pensions plans should fully fund them within seven years. It also said they should pay higher insurance premiums to the PBGC.

But business has warned the administration proposals could scare more companies into terminating their pension plans.

Boehner has said he favors a longer phase-in of the premium hikes, but has given few clues otherwise as to his intentions. In the Senate, Finance Committee Chairman Charles Grassley, an Iowa Republican, is also actively working on a pension reform bill, but an aide noted that he had been distracted by the need to write legislation on a Social Security overhaul.

A House Democratic staffer said there was precedent for a pension default moratorium, because Congress had intervened in similar way in the 1980s after the former LTV Steel Corp. announced it would not pay health benefits for retirees.

Congress then changed bankruptcy law to prevent companies from arbitrarily canceling health benefits, the staffer said. "We are wondering if pensions can be added to that."

[Libloather]

In this undated photo released by 'Stewardess Stripped' calendar, a computer generated photo of woman posing on a wing for a 2006 calendar is being offered by a group of current and former United Airlines flight attendants. Reflecting a mix of humor and anger, the calendar was released to coincide with a bankruptcy court's approval this week of United Airlines plan to terminate $9.8 billion in employee pension obligations. (AP Photo/Stewardesses Stripped, Bruce Baker)

In this photo released by the 'Stewardess Stripped' calendar, a group of five women, ranging in age from 55 to 64, pose for a 2006 calendar in various states of undress to publicize their plight. Reflecting a mix of humor and anger, the calendar was released by a group of current and former United Airlines flight attendants to coincide with a bankruptcy court's approval this week of United's plan to terminate $9.8 billion in employee pension obligations. (AP Photo/Stewardesses Stripped, Bruce Baker)

International Association of Machinists and Aerospace Workers President Randy Canale (L) and Sara Nelson Delacruz talk with the media outside the Dirksen Federal courthouse in Chicago prior to a bankruptcy hearing for United Airlines, May 11, 2005. Ground workers at United voted overwhelmingly to authorize a strike if a bankruptcy judge granted the carrier's wish to terminate their union's labor pact. (Stringer/Usa/Reuters)

Sen. Edward Kennedy, D-Mass, and Rep. George Miller, D-Calif., left, join United Airlines employees during a news conference on Capitol Hill, calling on a Chicago bankruptcy court to reject an agreement allowing the airline to move nearly $10 billion in unfunded pension liabilities to the Pension Benefit Guarantee Corporation, Tuesday, May 10, 2005, in Washington. (AP Photo/Manuel Balce Ceneta)

Sara Nelson Dela Cruz, spokesperson for the Association of Flight Attendants dons a CHAOS (Create Havoc Around Our System) shirt and a strike button before entering federal bankruptcy court with Members of the International Association of Machinist and Aerospace Workers Wednesday, May 11, 2005 in Chicago where their unions are battling United Airlines attempt to terminate the collective bargaining agreement that the machinists have with the financially troubled airline. The machinist union has overwhelmingly authorized a strike if the agreement is thrown out. (AP Photo/M. Spencer Green)

[yoe]

None of the airlines are going to make it if the price of fuel doesn't come down. Is there a fuel scam going on?

[festus]

These pensions when ditched by the companies are then taken over by the PBGC, a government backed corporation that insures the pensions.

In UNITED's case most of the workers who are collecting the pension were already told take early retirement or get laid off so many took it, including people I know well.

I don't think a company should be allowed to make pension promises it can't keep and then walk away from them. Either meet your obligations or go bankrupt.

I'm not thrilled about the taxpayer picking up the bill from the PBGC either. I think for the PBGC to take over a pension the company should have had to go out of business first, not just walk away from its debts. Otherwise we just create the incentive for the to plan on the PBGC taking over the sky high promises they make if times go bad.

The PBGC is only going to pay about $0.50 on the dollar of expected benefits.

[festus]

Either meet your obligations or go bankrupt.

What I mean is go out of business period.........

I know United went bankrupt. DOH !

[pageonetoo]

The PBGC is only going to pay about $0.50 on the dollar of expected benefits.

WE, the taxpayers should not be responsible for anybody's pensions...

I would support an effort to build some more 'po' old folks' homes, if people aren't prepared for old age, on their own! Other than that, their families should take care of them...

Everybody wants into my pockets, but nobody will give it back to my kids!

[EQAndyBuzz]

UAL shuld close its doors, sell its assets and pay out the pension first and foremost.

Or. maybe UAL gives everyone back what they paid in and these people can put it into Social Security since it is such a good retirement vehicle.

[EQAndyBuzz]

You know, if they give everyone back their contribution and let them put it into a personal retirement account the problem would be solved.

Maybe we let them put it into US treauries and give them an extra point of interest rather than funding it for them.

[The Electrician]

While I haven't been following this issue closely, I am struck by the legions of Democrats who, only a few weeks ago vociferously protested the Republican "interference" with the workings of the independent judiciary in the Schiavo case, yet in this issue they are lining up to interfere with the workings of the courts (see the Kennedy photo and caption above), and are rushing to try and get legislation hastily enacted to frustrate the decision of that same court. Of course we all know that Democrats are by nature hypocrites, but I'm amazed that this brazen an example has been totally missed by the MSM. How come we don't hear a peep of outrage at the Democrats' attempted usurpation of the role of the courts now?

[pageonetoo]

UAL shuld close its doors, sell its assets and pay out the pension first and foremost.

..sell the assets? They have less than nothing, and owe for the equipment, etc. Why should their suppliers/creditors get pushed further down the line. They are all people, too! Pensions are property, and belong to the entire spectrum of creditors. If they can't pay Boeing, then Boeings' folk can't make it!

I'm sorry, but if you lump yourself into any system, you should not expect another 'system' to bail you out.

Social Security is a grand, gum't sanctioned, ponzi scheme. (So are most retirement plans, and union orgs.) They depend on an ever-increasing 'fund' to cover their obligations. Unfortunately, they invest wrong, get stolen, or just run out of cash. When they fail, then the hopeful recipients want someone else to pay for their own personallack of planning.

Isn't it great to have a gum't that wants to look after us, just like the Soviets tried! /sarcasm

[EQAndyBuzz]

No, you are right. I posted another comment after realizing what I said. I would however obligate UAL to give everyone back their contribution and let them put it in individual retirement accounts.

[Hunble]

Under the court-approved deal with United, the Pension Benefit Guaranty Corp. would guarantee $6.6 billion of the nearly $10 billion in benefits in the airline's pension plans, meaning many of the 120,000 workers can expect pension cuts.

This should come out of the TSA's budget, since they are the ones who are responsible for the troubles of airline industry.

[COEXERJ145]

This should come out of the TSA's budget, since they are the ones who are responsible for the troubles of airline industry.

The airlines were in trouble long before the TSA ever existed. September 11th simply caused their already precarious financial situation to spiral out of control.

[SAJ]

Any airline taking a hit from high fuel prices has only itself to blame. Future needs for jet fuel are easily hedged, have been for decades...but UAL, Delta, NW, and American haven't bothered to hedge for the most part. Contrarily, SW, AirTran, and JetBlue have hedged (brilliantly in AirTran's case) and aren't being dinged by elevated fuel prices at this time. And they won't be, either, for about another 9-10 months.

[gitmo]

Perhaps this will be the end of pension plans in this nation. Pay the employees up front and let them manage their own retirement plans.

[samm1148]

You are exactly right. These industries have been socialized to the point that they can't compete in a market system. What is worse is that people (even some on here) think all airlines will go away without taxpayer's dollars to fund them. Right...we are all of a sudden going to go back to a pre-1920 nonflying society. You call me when the shuttle has landed. Let them go bankrupt belly-up whatever; just get the GD government out of them. A strong lean competing airline business will emerge offering better cheaper service.

[pageonetoo]

I would however obligate UAL to give everyone back their contribution and let them put it in individual retirement accounts.

...and where does that money come from, if they are broke, and indebted beyond reason? Your hole is getting deeper.

In the beginning, the creators of this country took care of themselves, and their families. Hell, even the slave owners took good care of their slaves, most of the time. They had an investment in keeping them healthy, and (re)productive.

Find land. Clear land without bulldozers. Cut down trees, and hew them to build houses. Grow and preserve vegetables. Raise animals for meat. Make clothes, with hand made materials. Build fences. Keep a gun by the bed, to protect your family from creature and man (no 911). All, without electricity, air conditioning, or running water. Sometimes, they did it after loading everything into a horse/mule drawn wagon, and spending months heading toward a promise. It wasn't about social security, or pensions. It was because they saught freedom, to be on their own!

Today, in the light of modern man's social system, with 'cradle to grave' care on the horizon, we are bankrupt before we start!

Take care of yourself. Buy land, it's (almost) always a good investment. At the very least, you get to pay taxes on it, and can live there. They aren't making any more! Invest in your own future, and keep watch over it. It's your life!!!

[pageonetoo]

Perhaps this will be the end of pension plans in this nation. Pay the employees up front and let them manage their own retirement plans.

I am always amazed at the number of so-called 'conservatives' who howl so much about their pet social systems. Retirement plans are just another bit of socialism. Saving (and investing properly) for your old age is a personal decision. Nobody, but you, should pay for it. If you don't plan, then go to the 'Poorhouse". I"ll spend a buck on that! Just don't expect me to clean it up!

[EQAndyBuzz]

"...and where does that money come from, if they are broke, and indebted beyond reason? Your hole is getting deeper. "

Why are they broke, why are they indebted and why are they spending my monetary contributions from my retirement?

Based on that assumption, the present Social Security system is fine because the government can spend my money and if they go bankrupt oh well...

[gitmo]

That was my point. The pension is a contract between an employee and an employer. Rather than promise some future monetary recompense (based on the future viability of the company) it would be better to pay a smaller amount today and leave it to the individual to invest.

[longtermmemmory]

These democrats have no clue about bankructcy court. They might as well be legislating goood feeeelings as mandatory.

This is just a blatent pander for campaign contributions, nothing more.

If the pension is turned over to the feds, the union has nothing they can scam for payola.