Pension stance opposed
Advertiser News Services
CHICAGO — The federal agency that bails out troubled pension funds asked a federal bankruptcy court yesterday to block United Airlines' plan to halt pension payments, fearing the move would swamp the cash-strapped system.
The stakes have grown even higher for the Pension Benefit Guaranty Corp., the agency disclosed, with United's pension plans underfunded by $8.3 billion — up $800 million from a year ago.
"United's decision to stop funding its pension plans increases the risk of loss not only to the company's workers and retirees but to participants in other plans insured by the PBGC," said executive director Bradley Belt. "The bankruptcy court should reject this attempt to sidestep the statutory funding rules. Agreements between private parties must not take precedence over federal pension law."
United said deferring contributions to its pension plans provides critical liquidity, flexibility and stability as it continues to restructure work and "pursue exit financing without a federal loan guarantee."
"Our responsibility lies in successfully restructuring our business for the benefit of all United stakeholders in a way that ensures that we can thrive as a competitive, sustainable company post-exit," the company said.
Both the Association of Flight Attendants and the International Association of Machinists and Aerospace Workers filed objections yesterday to United's motion that the court approve the proposed financing terms.
"The financing agreement should be denied because it is predicated on United halting its funding of employee pension plans, which the Pension Benefit Guaranty Corporation has said is inconsistent with federal law," said machinists union vice president Robert Roach.
United said a new, $1 billion interim financing package effectively prohibits further pension contributions before it leaves bankruptcy.
United sponsors four pension plans covering almost 119,000 workers and retirees, according to the PBGC, a federal corporation created under the Employee Retirement Income Security Act of 1974.
Of the $8.3 billion in underfunding, the agency estimates it would be liable for $6.4 billion, under guarantee limits set by Congress, if all four plans terminated.
The PBGC guarantees payment of pension benefits earned by 44 million American workers and retirees in more than 31,000 private-sector defined benefit pension plans.
Austan Goolsbee, professor of economics at the University of Chicago Graduate School of Business, said the PBGC's payouts and deficit are growing as more companies dump their pension obligations on the federal government. He said the agency is concerned that if United is successful, other companies will attempt similar moves.
If that happens, he said, "It will require a huge bailout."
The International Association of Machinists and Aerospace Workers, which represents more than 20,000 United ramp workers and customer service agents, has filed lawsuits challenging the airline's stance.
Other unions representing UAL workers also are angry. Earlier this week, the Air Line Pilots Association said its members would "use every resource at our command and every legal means available to prevent the company from destroying the pilot pension program."
"The management at United Airlines and other carriers suffer from a lack of imagination in addressing economic challenges and have utterly failed to take advantage of the savings they have already received from pilots and other employees," ALPA president Duane Woerth said yesterday.
