Quote:
Originally posted by Tyrone Slothrop
Fringey, since you are the expert and my eyes glaze over when I hit the word "pension," could you explain to me why this story should not leave people troubled about their pensions? Are the facts unique to United?
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I don't think it was correct to allow United to continue as a business but dump its pensions on the PBGC. I think dumping pensions on the PBGC should be reserved for companies actually going all the way bankrupt, not part of a reorg. So, yes, it concerns me
Outside of the United situation, in the more normal situation a company actually goes all the way bankrupt. Given that the alternative is that the people never have had a pension at all, I am not hugely unduly upset because it is primarily the relatively large pensions that get cut. From the article: "The Pension Benefit Guaranty Corp['s] . . . rules allow a maximum benefit of $45,000 a year for those who retire at age 65." A DB pension benefit can't be more than, I think, about $170,000 a year. Yes, I realize that there's a big difference between $45k and $170k, but it's better than the nothing they would get in some other circumstances -- you can't get blood from a stone, and if a company is for real bankrupt, having that $45k guaranteed is better than nothing. Note that these are not plans that the employees contribute to, and that people can't get a bigger pension than what they were earning -- so people with the big pensions were making at a minimum the amount they were getting from the plan.
I guess, my question kind of is, would you rather that the employees had not had this plan at all?
I would not have a problem with a law that required that all executives would have to give up their supplemental pensions, and that money put into the qualified (broad-based) plans, before it could go to the PBGC. Unfortunately I think that would have to be prospective only.
What do you think the solution is? Ignoring the United reorg situation, and sticking to the basic rule that only companies which actually go out of business are dumping the plans on the PBGC, and keeping in mind that more companies go out of business when the market sucks -- so the value of the pension trust may be falling as the company becomes less and less able to meet expenses. I guess it could speed up the bankruptcy filing . . .
