Posted on 03/11/2005 1:24:16 PM PST by Willie Green
WASHINGTON (Reuters) - The agency that backs corporate pensions said Friday it was taking over United Airlines' pension plan for ground employees, saying the plan operated by the bankrupt airline was only 30 percent funded.
The Pension Benefit Guaranty Corp. said it would guarantee payment of an estimated $2.1 billion in benefits out of the plan's $2.9 billion shortfall. The plan has more than 36,000 active and retired employees, the agency said.
(Excerpt) Read more at money.cnn.com ...
Wonder how it got that way. Many of those underfunded plans were underfunded at the behest of the unions.
I'd much rather have a defined contribution plan than a defined benefit plan. There's no such thing as an underfunded defined contribution plan. Not only that, but I wouldn't want my employer owning and running my pension fund.
This is an artifact of the graduated income tax. Pensions as employee benefits are not taxable to the employer. A flat tax would eliminate the incentive for employees to want compensation in kind rather than as cash.
It shouldn't have..never...once a plan can't be funded..i.e. the implicit promises cannot be kept..the plan shoudl be terminated..assets distributed to the participants..however, "playing with the numbers".also known as changing the assumptions...is easily done...If I assume that plan assets will grow at 9% over the next 30 years, the plan can be overfunded..if I assume 4%..it will be underfunded..
They get that way because the unions strike, or threaten to strike, for higher and higher pensions and the employers promise them the higher pensions. Then the employers find themselves unable to fund the higher benefits.
Dear Paleo Conservative,
"This is an artifact of the graduated income tax."
There are many tax-advantaged defined contribution plans, too, and have been for 30 years.
Defined benefit plans are actually artifacts of two things: corporate paternalism; and unrealistic fear of the stock market, probably a hangover from the Crash of 1929.
It is rooted in the belief that the average person can't handle his own long-term investments, nor bear the risk thereof.
That's what's currently driving the debate against Social Security reform.
I've even seen people here on FreeRepublic expressing ideas with that underlying assumption.
sitetest
Pensions are a thing of the past...better start saving for yourself!
Just look at Delphi.
I have no idea. That's the problem with articles like these. they leave the impression that the company was just being evil...but no information on how the situation came to be.
During the stock market boom, many unions demanded that the pension funds be taken out of more secure traditional deposits and put into the market to an exceptional degree. This was combined with the liabilities being calculated based upon current growth and contributions cut to match - along with several other quirks.
This produced a kind of whipsaw effect.
Pensions are a thing of the past...better start saving for yourself!
........................................................
My thoughts exactly! I am only in my twenties but have seen friends and family lose fortunes in pension funds. Had they listened to me and invested in property and high yield savings accounts they would be quite rich(mind you I was only 13 at the time).
The only person I trust to look after my money is myself. Not the Government and certainly not a Banker.
I seriously doubt that. The unions would like to yank every last cent from the shareholders. If the union could get shareholder money into the pension plan, they certainly would have.
When I joined UNITED in 1969 I signed a contract that I would be at work on time ,I would do the job as requested,and receive days off as needed (24/7).United in return would pay me in money (greenbacks)and benefits (health care,life insurance,and a pension when I retired). Now that management has driven the airline into bankruptcy they no longer want to HONOR their contract that we both signed. Is this breach of Contract???
If the courts allow this,all the other U.S. Airlines will follow and the TAXPAYERS will be required to bail out the government insurance board (remember the savings and loan deal)
Next up for taxpayer bailout - Ford, GM, .... Who bails out the taxpayer? No one. The debt accumulation is a train wreck in slo-mo.
Watch the AIRLINE sector for pension relief???
All the time I worked, I thought I had the same agreement. I even thought the company set up an annuity for each retiree. I was surprised to learn when I retired that the plan will pay as long as the company is in business. I am glad I also saved in the 401K program. No one should plan retirement on anything except their own savings.
Which is why President Bush's SS plan should be seriously looked at by the younger workers, and why older workers should not even have a vote in the matter. Oh, and the SS plan provides an annuity so it is better than the present SS plan. (I do not know why this is so hard to explain.)
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