United Airlines trying to dump pension obligation

[BristolBane]

http://abcnews.go.com/Business/wireStory?id=744434

An overflow crowd of current and former United Airlines workers turned up at a downtown bankruptcy court Tuesday, delaying a courtroom showdown between the carrier and its labor unions over its most radical attempt yet to slash costs.

The target this time: employee pensions.

The carrier is seeking a judge's approval of its plan to have the government's pension insurer take over its defined-benefit plans, resulting in the largest-ever U.S. pension default. United workers would lose about a quarter of their total pensions if they are shifted to the Pension Benefit Guaranty Corp.
Before the hearing, United Chief Financial Officer Jake Brace said the carrier has no choice but to seek the difficult action.

"All the work we have done and continue to do is about ensuring a healthy United for all our employees and our customers," Brace said. "That work enables competitive jobs and a successful future for our company."

 

[TromboneAl]

After reading that story and the similar one on MSNBC, I'm still missing something. Is it a simple case of United saying "Hey, we don't have enough money for the money we owe our employees, can we simply not pay them?" and the government says "Yes, that's OK."?

What's the full story?

 

[Michael]

They belong to a union, and unions don't support Republicans. The Republicans want to make an example of them.

 

[Newell]

Michael

You can't be serious --- can you?

 

[Mr._johngalt]

Michael

You can't be serious --- can you?

Sounds like Mikey extended cocktail hour a bit

In bankruptcy, you can cancel almost any contracts or obligations
if you can get court permission. Seems to me the pensions
are a good place for United to start. Martha may weigh in.

JG

 

[Martha]

There is a section of the bankruptcy code dealing with retiree benefits and modifications can be make to those benefits that are necessary to permit the debtor's reorganization if all creditors, the debtor, and affected parties are treated "fairly and equitably". Etc.

 

[gratefuled]

See my earlier "Work is the New Retirement" thread.

United's defined-benefit program off-loading to the PBGC has to be one of the most coldly calculated evasion maneuvers I've ever seen. The PGBC accepted $1.5 billion in debt and equity in a reorganized UAL, but assumed pension plans underfunded by as much as $4 billion, net. Great investment for UAL, lousy investment for taxpayers.

I read about one woman whose $1,700 monthly pension has been reduced to $800. If memory serves she was in her early fifties....a few years away from non-penalized 401K withdrawals and many years away from Social Security. Welcome back to the labor pool, dear.

Ed

 

[Eagle43]

http://www.mastersforum.com/archives/drucker/

1. Demographic Upheavals

Set aside technology and wars and politics and economics and business for a moment. The greatest revolution taking place today is in the demographic makeup of the nations of the world.

The danger turns out to be no overpopulation, which environmentalists have been warning us about, but underpopulation. There will simply not be enough young people in the next century to support all the old people.

The shrinkage of the pool of young people is not only very rapid, it is irreversible.

Otto Von Bismarck started this trend in motion in 1888 when he created the first social security plan, with a retirement age of 65. Only, he didn't plan on a lot of Germans reaching that age. Today, life expectancy is in the 70s and 80s in developed countries. The birth rates are not keeping up with the accumulation of healthy old people.

The unavoidable implication of this shift is that future politics will be decided by a group of old people who produce nothing and use up much of their societies' resources.

For one thing, Drucker said, we will have to raise retirement age, to 75 or even higher. For another, the nature of retirement will change. Expect people in the next century to phase in and out of retirement. And why not? They will be in better shape than 75 year olds of this era, and will have great job mobility from having worked in many positions and places in their careers.

----------
Can you spell "Coming Generational Storm"? United is just the tip of the iceberg. Sad, but inevitable.

 

[Michael]

You can't be serious --- can you?

"You reward your friends and punish your enemies, if you can."

Quote from Republican President Richard Nixon

http://www.libs.uga.edu/media/collections/nixon/nixonday7.html

 

[Mr._johngalt]

"You reward your friends and punish your enemies, if you can."

Quote from Republican President Richard Nixon

http://www.libs.uga.edu/media/collections/nixon/nixonday7.html

I'm not too sure where this thread is heading, but rewarding your friends and punishing your enemies seems perfcetly logical to me.

JG

 

[Michael]

Which is exactly why I think airline union members are doomed. They vote against Republicans, so they are their enemy.

The Republicans decided that somehow paying off the tobacco farmers $12 billion was somehow a sensible thing to do, and tobacco farmers basically spent their lives killing Americans. All the while lamenting that protecting airline mechanics who spent their lives working to build the USA was stupid. Guess which group gives the most political contributions to Republicans?

 

[Newell]

PBGC was created, at the urging of labor, to prevent the total loss of pension benefits for employees of defaulting companies as part of ERISA (Employment Retirement Income Security Act). Want to guess which president signed it into law in 1974? Clue -- his nickname was Tricky Dick

 

[Michael]

May the Lord bless his soul. Its just a shame that so many people have to lose half or more of their pensions when the agency takes over.

 

[Newell]

So, would the solution be more advantageous for employees if PBGC didn't exist (probably meaning the loss of ALL of the employees' pensions)?

 

[Cut-Throat]

I can't understand why we don't go after the executives that plundered the assets of the company. They are sitting in their Florida Mansions with 10's of Millions in their Bank Accounts!

 

[Michael]

No.  The ideal solution would be to fully fund pensions.  Don't make people work 30 years, and then not pay them what they were promised.  The PGCG should be funded to provided everything that was promised also.

According to the WSJ, the PBGC has agreed to pay $6.6 billion in UAL pensions, and dumped $3.2 billion.  IOW, the union workers will lose 1/3 of what they were promised.  Better than nothing, but it is sure a rotten thing to do, now that they have already put in the years of hard work.  They should have told them the day they applied for a job that they had no intention of paying all of their promised pension.  That way they could have decided whether they wanted to pursue another line of work or not.

http://online.wsj.com/article/0,,SB111575239031129484,00.html?mod=home_page_one_us

 

[Newell]

I agree that this will be a tremendous hardship for a number of workers. I also agree that much (most?) of the fault lies with management. Let's just not blame the Republicans (or Democrats). It seems to be in vogue today to blame the Republicans for every evil known to mankind, including athletes foot, and, quite frankly, it's wearing thin!

 

[Mr._johngalt]

I can't understand why we don't go after the executives that plundered the assets of the company. They are sitting in their Florida Mansions with 10's of Millions in their Bank Accounts!

Man, you are almost 55. Wake up! This is the way the world works.
Besides, I'd rather leave the execs with their mansions and millions
than let the government sort it out. Sorry. Your "rant" just seems
like complete nonsense to me.

JG

 

[Michael]

I did not intend to offend you oldbykur. Since this is a sensitive topic for you, I will do as you ask and drop it.

 

[Cut-Throat]

Man, you are almost 55. Wake up! This is the way the world works.

Well, we used to King of England's Ass over here, and that is the way the world worked then. There are those that accept the status quo and those of us who don't.

I would have thought you were one of the later!

 

[Mr._johngalt]

Well, we used to King of England's Ass over here, and that is the way the world worked then. There are those that accept the status quo and those of us who don't.

I would have thought you were one of the later!

I am no Don Quixote. I only fight battles I think I can win. The status quo looks pretty tough to me. Anyway, getting back to those nasty
execs and their ill gotten gains. It's a dog-eat-dog world and that
ain't no lie! Maybe they did something immoral, illegal or fattening
and maybe they didn't. Anyway, they have got the money and
the pension recipients are getting screwed. Seems like business
as usual to me.

JG

 

[Nords]

There's a moral here for those about to retire. 

When these situations are reported in the media, my FIL is heartily glad he took his pension as a lump sum.  CBS offered plenty of other options but a lump sum was about the only one they couldn't somehow bail out of.

This type of "pension insurance" might even be worth paying $$ to financial advisors if you're not interested in managing your own money.

 

[sgeeeee]

I can't understand why we don't go after the executives that plundered the assets of the company. They are sitting in their Florida Mansions with 10's of Millions in their Bank Accounts!

Exactly. The thought progression of several people seems to be:

1) there's not enough money for the airline to be profitable today.

So 2) the union workers should be screwed out of their pension.

Seems like there might be some other options.

 

[unclemick]

Until a crowd gathers that the talking heads can interview and make a 'newsable event" - ?

Not much happened 4  to 5 years ago when crusty old troublemakers(Buffett and Bogle to name a few) - pointed out that underfunding pensions via upping the 'allowed' projected return probably wasn't a good idea and the handholding between the SEC, 'independant accountants', boards of directors of companies - was feel good in the face of reality. Even better was taking 'excess returns' from the pension 'trust' during the good times to boost earnings. Defined pensions are supposed to have money in trust - ?

I'm grossly oversimplifying here.

The other turd in the punchbowl - is the health coverage portion. The SO has a very small cola union pension(UAW negotiated) with health coverage(deductibles).

Troubled industries will make the radar first - expect more fun to come.

Meanwhile - ask a Korean War vet about his health coverage.

 

[Nords]

The other turd in the punchbowl

Thanks a lot, Unclemick, I'll be carrying that image around in my brain for a while!!