Judge oks United to default on employee pensions
United Airlines received permission from a bankruptcy judge to terminate its four employee pension plans, creating the largest pension default under the government’s pension guarantee program.
The ruling allows UAL Corporation, United’s parent company, to walk away from $3.2 billion of pension obligations. The federal government will assume responsibility for the pension plans to cover approximately 134,000 employees, through the Pension Benefit Guaranty Corporation.
This will result for some United retirees to received much lower pension payments, while others seeing minor changes in benefits.
It is now to be seen if predictions that other airlines will follow United’s strategy and use bankruptcy protection to shed their pension expenses, at the taxpayers expense. And, what if anything, will the White House and Congress do to plug this loophole.
Bankrupt US Airways had terminated the remainder of its pension plans earlier this year, leaving the federal government with the responsibility to pay US Airways’ current and future retirees $3 billion worth of pension benefits.
United will be offering its current employees a retirement program which is similar to the 401(k) programs.
Charles Kao
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