Like many aging baby boomers (my, I hate that term), I have taken stock of my potential retirement income.
Along with a slowly recovering IRA, 401(k) and Social Security exists a promised pittance of monthly income from a pension earned in my first 10 years as a journalist.
Although its eventual payoff hardly will cover monthly golf fees, I have counted it among the other retirement assets. This pension exists based on trust, forged between my former employer and myself, that I would defer income to be paid into the pension, which would pay me a specific amount in regular payments on reaching retirement.
So it was with heightened interest that I read about a Denver bankruptcy court allowing United Airlines permission to dump assets from four employee pensions into the federal government’s already over-committed Pension Benefit Guaranty Corp. established to take over defaulted plans.
The bottom line is that United, for more than 25 years flying friendly skies while wallowing in the throes of near or actual bankruptcy, again was bailed out.
Forgotten amid this financial blunderbuss are its 134,000 employees, who stand to lose an average of 25 percent to 50 percent of their pension values. In addition, nearly all United employees, except for the highest senior managers and directors, have agreed to take substantial pay and benefit cuts over the years.
The pension default has spurred several news stories regarding the increasingly poor health of the nation’s defined-benefit pension plans. A study released last week by the Government Accountability Office revealed that more than half of the nation’s largest companies, using loopholes in federal law, failed to make promised payments into their pension funds in the late 1990s and the bear market that took hold in 2002.
Government investigators found four in 10 plans audited were less than fully funded from 1995 to 2002. At issue was failure to make company-promised payments; employee contributions were largely deposited into pension accounts. Federal pension laws allow companies to disguise the actual economic value of their fund.
Although only very large corporation pension plans were audited, many businesses are suspected of failing to fully fund employee pension plans. As a result, the Pension Benefit Guaranty Corp. estimated that American companies owe about $450 billion in pension liabilities and 851 pension plans are underfunded by at least $50 million.
A separate survey by the National Association of State Retirement Administrators found the nation’s largest government pension systems underfunded by $267 billion.
Ironically, United made full payments to its pension funds but still remained underfunded by $10 billion when it sought court approval to default. GAO investigators did not name the companies found to be using legal loopholes to defer payments so no one knows the status of Delta Air Line’s pensions that are expected to be the next in line to be taken over by the government if Delta declares bankruptcy.
What’s happening, according to the findings of government auditors, is that American corporations have been allowed to underfund pensions, enabling them to use the money for expansion, mergers and – possibly- lucrative bonuses and buyouts for senior executives.
The losers are the workers. The agency’s decision to allow United Airlines to default on its pension plans, shifted all the costs of poor management decisions and airline competition to the oldest and most loyal of its workers, Teresa Ghilarducci, an associate professor of economics at Notre Dame University, told Congress recently. “By losing their pensions, airline workers are paying for factors out of their control and shareholders, customers and managers benefit.”
So, what do folks like you and me do with the information that the nation’s traditional pension plans may not deliver what we were promised 30 or 40 years ago?
My puny pension could be at risk because my former employer sold the company and went out of business. My wife collects monthly on a pension as part of an early retirement buyout of a few years ago.
So far, there’s no indication that either plan is in trouble. We’re assuming a promise is a promise, and our golf fees will be covered.
Then, that’s what 130,000 United Airline employees thought just a few years ago when the company began its spiral into the financial morass of bankruptcy and broken promises. Who knows what’s next.
Write Eric Zoeckler at The Herald, P.O. Box 930, Everett, WA 98206 or e-mail mrscribe@aol.com.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
