U.S. to Take Over UAL Pilots' Pensions

[canyonblue]

.....

 

[philo beddoe]

Where does the cash come from to pay the pensions?

 

[skykid]

FATBOYPLT, I agree that the thing hasn't even been voted on yet, but I would say whether the defined pension goes away or not has absolutely nothing to do with the vote. The big picture is that not United now, nor Delta and American and the rest of the airlines with defined pensions in the near future, are going to compete domestically with the LCCs that don't have defined pensions. Or maybe we should wait and see what Virgin USA's defined pension looks like.

You can argue over the details of the UAL tenative agreement with the pilots, but sooner or later it comes down to no pension-with job, or no pension-no job. There are two realities to come to grips with to fully understand this. First United is not coming out of CH11 with defined pensions. To deny this means disbelieving all the potential lenders. And the reason the lenders are insisting on shedding the pensions gets to reality number two. Even a fairly healthy defined pension plan right now, is not going to compete in this market with all the airlines that don't have them in the longer term.

I don't know if United will survive even if they can scrap all the pensions w/o too much upheavel. If you had told me oil would go over $50/barrell two years ago I would have said that's the end right there. We'll see.

 

[a320drivr]

It comes from you, the tax payer.

 

[fam62c]

What happens to the retirees?

I have a relative who is a retired UAL pilot and retired 18 years ago at the age of 60. What happens to his retirement at this point? Do the retirees get the same benefit they had before or do they get paid at a reduced amout? If the benefit is paid at a reduced amount is it a percentage or is there simply a flat amount that they pay to everyone who has a pension that's been taken over by the PBGC. Just curious how this works.

I fear that this is going to cause all of the majors to seek termination of their DB plans in order to be on equal ground with airlines that don't have them. It looks like DB plans will be a thing of the past for people that work in private industry. I'm worried that this is the first step towards employers eliminating ALL contributions to employee retirement including 401K matches. This is going to put airline pilots at a real disadvantage financially because we are forced to retire at 60 while other employees can work much longer. I wonder how long it will be before the PBGC starts lobbying for the end of the age 60 rule.

 

[skykid]

Fam62c, the relative you know is going to go from having whatever his pension is now, I'm going to guess over $100K/year, to the max the PBGC will pay out, which is $40k/year and change. The only retirees to really get the shaft are the pilots. For the most part, mechanics and FAs will be below the max the PBGC pays out.

 

[Boeingman]

Fam62c, the relative you know is going to go from having whatever his pension is now, I'm going to guess over $100K/year, to the max the PBGC will pay out, which is $40k/year and change. The only retirees to really get the shaft are the pilots. For the most part, mechanics and FAs will be below the max the PBGC pays out.

Actually, since our FAA mandated retirement age is 60, the max benefit paid out is only $28K. You have to be able to work to 65 to gain the larger benefit.

 

[CatYaaak]

So taxpayers wind up footing the bill for airline pilot pensions? Well, that pretty much sucks.

 

[skykid]

B-man, I think you are wrong. I think once you get past 65 you get the max benefit. I'm relying on info from the WSJ though and have not done the research myself. I'll look it up.

 

[Boeingman]

B-man, I think you are wrong. I think once you get past 65 you get the max benefit. I'm relying on info from the WSJ though and have not done the research myself. I'll look it up.

Thanks for looking that up. Is the PBGC going to attach and sieze those $550M in convertable notes for the pilot retirement plan?

 

[Boeingman]

So taxpayers wind up footing the bill for airline pilot pensions? Well, that pretty much sucks.

As they did for the steel industry and other large defaults on pension plans.

 

[fam62c]

Thanks SkyKid

Fam62c, the relative you know is going to go from having whatever his pension is now, I'm going to guess over $100K/year, to the max the PBGC will pay out, which is $40k/year and change. The only retirees to really get the shaft are the pilots. For the most part, mechanics and FAs will be below the max the PBGC pays out.

Thanks for the reply. I'm not sure what my relative gets now but he retired in 1986 before the pattern of really huge contracts started so I would doubt it's over 100K but it could be. In any case it sounds like he will get 50 cents on the dollar or less. That's a major bummer. I wonder if the retirement plans for the management team will have their maximum benefits capped at 40K, I doubt it. I guess that my relative is one of the lucky ones, at least he got the full benefit for 18 years and he's careful with his money so I'm sure he will be fine. This is a real kick in the shorts for the pilots that are newly retired or retiring soon. I fly for a regional and all I have is a 401K plan but in some respects that might be good. At least the money is mine and it's there regardless of what happens to the company or me. Anyway, these are troubled times and I guess what will be will be. A lot of people are getting hurt badly in this industry.

 

[SOVT]

"As they did for the steel industry and other large defaults on pension plans."

Actually, every company with a defined benefit plan pays into an "insurance" fund to guarentee pension benefits in case of a termination. Up to this point I don't believe that any taxpayer funds have ever been used to fund a terminated plan.

 

[Boeingman]

"As they did for the steel industry and other large defaults on pension plans."

Actually, every company with a defined benefit plan pays into an "insurance" fund to guarentee pension benefits in case of a termination. Up to this point I don't believe that any taxpayer funds have ever been used to fund a terminated plan.

I knew about the "fund", but I thought the LTV case put them in default at one time.

 

[G4G5]

G4G5, I'm confused. You posted on this board several times how the government would sooner liquidate UAL than take over their pensions. I tried to let you know that was not going to be the case. Any explanations?

I am not too proud to admit when I am wrong.

But, unfortunatly for the folks at UAL this could also be a sign that the Gov feels that with the way UAL is heading they would have gotten the pension sooner or later.