U.S. to Take Over UAL Pilots' Pensions

[FoxHunter]

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.

Maximum Monthly Guarantee from PBGC Web Site

I think you will find that if you wait to age 65 to collect your pension you will get $44,386. Since the FAA mandated retirement age is age 60 I'm not sure that is even an option, or wise since you would be getting no income for at least two years and only the reduced Social Security for the next three. In any case if you read the chart in the link you will find that at age 60 the max the PBGC will pay is $28,851.12 per year in 2004.

I'm not sure that the taxpayer will have to pay anything toward pilot pensions since although they are underfunded for the promised retirements of $100,000+ there may be no underfunding when these payments are reduced by 70-80%.

 

[satpak77]

just curious

how Kit Darby will make out when all the dust settles

 

[FoxHunter]

Questions from the USAIR section of the PBGC web site. You will notice the reduction in MAX Payment if you are married.

US Airways Plan Frequently Asked Questions

 

[CitationLover]

The government never was into backing pensions until there was a law passed by congress (some time back, the date escapes me), that said these large corporations didn't have to fund the pensions 100%. The companies I guess thought it was too much of a burden, and the cash could be used somewhere else, instead of what it was supposed to be used for. I can't believe it ever passed, but here we are. It amounts to fraudulent activity, just my opinion.

Employment Retirement and Income Securities Act of 1973.

The pension "underfunding" is a result of TWO primary reasons:
1) the bull stock market of the late 90's caused most pension fund managers to shift away from the 60/40 traditional asset allocation into a more stock heavy portfolio.
2) lowest interest rates in history

the plans are regulated by ERISA to be funded at 90% of the current liability (which is based on a 4yr moving average of 30yr treasuries, which don't exist anymore). since the stock market bubble burst the assets have tumbled, while the liabilities keep going up due to the lower and lower interest rates. also, lump sum distributions have stripped assets as their payouts increase with the lower interest rates.

db plans have long been on their way out, the airlines are catching up with the rest of the business world.

 

[Mugs]

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

Don't worry. When it gets to the point of the taxpayers bailing out the PBGC, the public will have realized a huge benefit from the very inexpensive air travel that has killed airline pensions. It just proves that sometimes low prices have other unintended consequences (like when Wal-Mart comes to town).

Here is another thing to consider. We live in a multi-trillion dollar economy that is continuing to evolve to compete in a now globalized economy. Allowing corporate America to shed its pension obligations will be essential to remain competitive. What has happened in steel and the airline industry will happen to all the remaining industries with defined benefit plans. The cost of terminating and having the PBGC / taxpayers pick up the tab will be a drop in the bucket compared to the competitive benefit on a global scale for corporate America.

 

[tyuwerty]

If the PBGC Web Site doesn't send shivers up your spine what does? It is like walking through a graveyard. I think I will up my 401k contributions.

Some Examples from PBGC:
BRANIFF AIRWAYS INC
EASTERN AIR LINES INC.
PAN AMERICAN WORLD AIRWAYS INC

What is even scarier is that PBGC does not appear to be indexed in anyway to inflation, were the UAL Pension benefits indexed?

Ex: Someone from Eastern is getting a whopping $26,000 a year assuming they were to get the maximum 65 year old benefit.

Addition:
PBGC does not guarantee health and welfare benefits.

There goes another $1000.00 a month to health insurance premiums.

 

[Boeingman]

I mentioned this awhile back that the real danger is the potential the PBGC may start seizing assets to cover the deficiency. Or at the least tie up collateral that may be need to secure loans with.

UAL is not just going to be able to walk away from this unscathed. This is not a good development for UAL.

 

[Mugs]

Statement by the United Master Executive Council, Air Line Pilots Association Regarding Today's Action by The Pension Benefit Guarantee Corporation
"We deplore the PBGC's ill-timed attempt to retaliate against the United pilot group in the United bankruptcy proceeding.

ALPA's tentative agreement with United does not permit the termination of the pilot pension plan without a final judicial determination that pension termination is necessary for the Company to emerge from bankruptcy or at any point prior to May 1, 2005. As the PBGC is well aware, there are no grounds for the termination of the pilot pension plan.

ALPA will vigorously oppose any effort by the PBGC to take over the plan before May 1, 2005 or to single out the pilot group for punitive and vindictive treatment in the United bankruptcy. Under the terms of the tentative pilot agreement, the Company has also agreed to oppose any attempt to terminate the pilot pension plan prior to May 1, 2005.

In addition, the tentative pilot agreement requires United to continue the pilot pension plan if any other United employee group maintains a defined benefit pension program following the bankruptcy. We will vigorously enforce that right against the PBGC or any other party that seeks to single out the pilot group for unfair treatment in the bankruptcy proceeding.

We are equally concerned about the timing of the PBGC action in the midst of a pilot membership vote over the tentative pilot agreement. We question whether the PBGC's action may be designed to confuse the pilot group, undermine the membership ratification process and deprive the pilots of the benefits and protections of the tentative agreement. If so, today's action is an outrageous ploy by the PBGC to harm the very employee interests that the agency is sworn to protect.

The pilots of United Airlines are critical to the reorganization of this Company and, by far have sacrificed the most to save the airline. We demand to be recognized and compensated for our unique contributions, and we will take every lawful action necessary to protect the interests of the United pilots against the PBGC or any other party in this proceeding."

 

[Snoopy58]

In addition, the tentative pilot agreement requires United to continue the pilot pension plan if any other United employee group maintains a defined benefit pension program following the bankruptcy.

There are reasons that they're doing this, but winning friends darned sure isn't among them!

Talk about bad choices & worse choices... dang!

 

[Boeingman]

The timing of this PBGC action is very suspicious. You have to wonder if there is something heinous going on behind the scenes financially to prompt this. If memory serves me correctly, at EAL, they made a similar move when it became clear the airline was going to fail.

Please don't shoot the messenger here.