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Originally posted by Say_hello_for_me
Just wondering (it doesn't personally affect me), but what is the deal with reneging on a pension obligation? Who does that leave on the hook and by how much? I understand about the taxpayer-agency bailout thingy, but do retirees or employees still take a hit while the company otherwise survives? Is some retired guy in Florida gonna get a call saying his pension check ain't coming no more?
If so, that's bad.
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For private sector defined benefit plans, the Pension Benefit Guaranty Corporation guarantees benefits up to a certain level if the company abandons an underfunded plan. So, people who were low-paid continue getting their full benefits but people whose benefit would be higher than whatever the maximum is will get a lower benefit. If the plan is abandoned but almost completely fully funded (which would be less usual) and the assets are sufficient to pay more than the guaranteed maximum, the people who are entitled to higher benefits under the terms of the plan will get higher benefits.
I'm not sure what the amounts are, exactly, but it's the relatively high-paid people who will get their benefits cut back, not the lower-paid people. So, like, this is an issue for the pilots plans at United or wherever but not really for the unions covering lower-paid people, because all of them fall within the level of benefits that are guaranteed.
The plans pay premiums to the PBGC -- that's how the benefits are funded.
