Posted on: Saturday, September 18, 2004
Irony shadows pension fund
By Rachel Beck
Associated Press
NEW YORK — Usually pension funds try to protect employee benefits, but that doesn't always hold true when they are looking to make money themselves.
Consider that the Retirement Systems of Alabama is a major US Airways Group Inc. investor, and the pension fund's chief executive, David Bronner, also serves as the chairman of the struggling carrier, which made its second trip into bankruptcy this week.
While Bronner is pushing for big worker concessions at US Airways and is trying to avoid payment to several of the airline's retirement plans in order to reduce costs, he has fought hard against any cuts to the Alabama pension funds that he manages.
There aren't any rules prohibiting pension funds from investing in companies that are trying to eliminate their pension plans. But when it does happen, it puts the funds in a predicament.
This is especially true for the Alabama fund, which represents nearly 300,000 current and retired teachers and state government workers, and its link to US Airways, the nation's seventh largest airline. The airline's filing for Chapter 11 came after it was unable to obtain from its workers' unions $800 million in annual cost cuts that the company said it needed to stay afloat.
The airline has said it will continue to seek those labor concessions while in bankruptcy, first voluntarily and then it could ask the bankruptcy court to cancel the existing labor contracts.
US Airways also failed to pay $110 million in contributions to the plans for its machinists and flight attendants that were due on Wednesday, and has asked the court to delay payment of $19 million owed to the pilots' 401(k)-style retirement plan. During its last trip through bankruptcy, it terminated its pilots' pension plan.
For Retirement Systems, its ultimate goal regarding US Airways is to protect its $240 million equity investment made in the winter of 2003 that helped the troubled carrier emerge from its first Chapter 11 reorganization. That cash infusion gave the fund a 36 percent stake in the company and put Bronner at the helm.
And even though the investment only represents a tiny fraction of the $22.3 billion assets that the fund has under management, Bronner has a fiduciary responsibility to act in the interest of the fund.
Yet it is still worth pointing out the irony in all this. Bronner happens to be the same person who came out swinging in the past year against Alabama Gov. Bob Riley's proposals to roll back retirement benefits as a way to curb a state cash crunch.
While Riley's plan was ultimately defeated, it wasn't before Bronner went on the attack. He said that it would be unfair for the state to alter rules in retirement and benefits for workers who are already paying into the system, according to comments reported by the Birmingham News.
