Failing Pensions Exact a Human Toll (I Say Take It Out of CEO Pay & Parachute Packages)

Washington Post ^ | 06/12/2005 | Dale Russakoff

[drt1]

United retirees lament broken promises, shattered dreams. Ellen Saracini lost her husband, United Airlines Capt. Victor J. Saracini, when his Flight 175 crashed into the World Trade Center on Sept. 11, 2001. Now she stands to lose more than half of her widow's pension in a very different kind of crash — United's default of its $9 billion pension obligations.

The scale of the default, the largest in U.S. history, has until now received more attention than the toll on the lives of the bankrupt airline's 120,000 employees and pensioners. Saracini discussed its impact on her and her two daughters in an interview yesterday, saying she hopes her story will help shift the focus to the laws and policies that allow such defaults....

[drt1]

This should be a criminal act and underfunding the pension plan is almost identical to not depositing an employees Soc Sec payments. However, it appears this fraud is legal, i.e., to underfund a plan and then put the remainder on the Pension Benefit Guarantee Corp. (Us) when in bancruptcy.

[CaliGangsta]

If companies act in bad faith by knowingly underfunding pensions then yes, that should be criminal. However there are a lot of uncertainties in the business, such as the big NASDAQ decline that began in 2000.

The solution is not to have taxpayers bail out the pensioners. That's socialism, pure and simple. Laws need to be passed reforming the pension system and mandating the language of pensions. Pensions where the recipients are GUARANTEED funds after retirement should be made illegal because such guarantees cannot honestly be made. Who knows what the future holds? Any company can have a turnaround and go bankrupt.

Instead these pensions should be replaced with specific contribution and actions by the company. For example, "the company will contribute x% of revenue per year to the pension fund, x% of the fund will be distributed yearly to pensioners". Something like that, only 1000x more complex. The point is that me and you shouldn't be left holding the bag.

[jocon307]

This is a very bad, unjust and unfair situation for these people. However, I am just amazed that anyone gets a six figure pension. I imagine I am going to be very poor when I am old, as six figures have never been in my mind, for either salary or certainly not pension. And I make a good living, I really do, better than mid-five figures.

[Paleo Conservative]

Defined benefit pensions are dinosaurs. Most companies put their new eployees in defined contribution pension funds. Why should anyone want his retirement income depedent on the contiunued existence of his previous employer?

[drt1]

OK but these jerks underfunded the plan yet there was no constituency to call them on the lack of payment per agreements. If the unpaid bill had been to, say, a fuel company you can bet the payment would have been made and other costs reduced accordingly to make the required payment.

Read the article further - The new CEO gets 4.5 Mill plus benefits and incentives and he says (From the article) "Tilton said that the default will not affect the payment, and that he has $1.5 million left to collect. He said this does not represent a double standard because United promised him the money in his contract."

What a joke and what poor regulation engendered by our well-paid and well pensioned lawmakers - And there is more to come. Not good and definitely not American - More characteristic of a Third World dictatorship if you ask me. /rant off

[mc6809e]

As much as the CEOs might make, it's a drop in the bucket compared to what these pensions need.

[cherry]

one name....Charles Hurowitz........

not as big as United but probably more painful......

[cherry]

perhaps I agree with you, but what about the govt pensions?......that's far an away a larger drain on the taxpaper......could we make all of them defined benefit plans only?

[cherry]

what I meant to say is, can we get rid of defined benefit plans for everyone, private and public employee alike, and replace that with 401's and the like.....

[drt1]

Agree that it wouldn't accomplish restitution for the pensioners but it would represent symbolic economic justice as it is these damned CEO's who preside over the short funding while, in many instances, grabbing hefty salaries, performance bonuses and their own 'Private' pensions in the form of additional deferred compensation.

Frankly, given the devastation some of these workers have had visited upon them, I'm surprised there hasn't been violence - Just as I'm similarly surprised about the relatively docile reaction of Enron, MCI and Healthsouth workers, retirees and stockholders.

[japaneseghost]

We're supposed to learn about pension rip-offs in HIGH SCHOOL. I took a college course in Business Math (semi-credited because in VA it's a high school course) that taught all about this.

Any CPA will tell you not to believe any company that tells you you have a pension. They are allowed to by law to tell you have a dollar, when you really have a nickel.

[A CA Guy]

I think the unions have been blackmailing companies for a long time into agreements they couldn't possibly keep in competitive markets.

We also can't afford as a country to guarantee every pension and to take many over.