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May 10, 2005

End Of Corporate Pensions?

-- by Dave Johnson

This is huge. Judge Approves End of United Pension Plans,

The ruling, which carries broad implications for U.S. airlines and their workers, shifts responsibility for United's four defined-benefit plans to the government's pension agency.
United's workers lose much of their pensions, AND United gets to shift the pension payments to the government (us) from their stockholders (the rich).

Because United does this, all the other airlines have to try the same, to stay competitive.

Tuesday's ruling, following a step taken successfully by US Airways Group Inc. in February, clears the way for similar actions elsewhere.

United's biggest competitors would be under the most pressure to follow suit. American Airlines, the largest U.S. carrier and a unit of AMR Corp., has said it will keep its pension plans but is concerned about No. 2 United gaining a financial advantage with the elimination of its pensions.

And, next come other corporations, probably starting with GM,
What designs might Mr. Kerkorian have on those [GM's] retirement plans?

Occasionally, an investor finds a way to separate an ailing company's pension plan from its business operations and send the obligations to the federal government. The government insures pensions, and by taking over a failing pension plan, it greatly reduces the sponsoring company's overall liabilities. That can turn a sick company into a winning investment. The pension insurance program bears the loss.

This is an old trick, shifting a company's pension obligations to the government (us) to the benefit of the shareholders (the rich),
The most visible example of this is Wilbur L. Ross Jr., who made a $260 million profit by taking over bankrupt steel companies just after they sent their pension plans to the government, at a cost of $6.4 billion. Mr. Ross acquired the assets of five steel companies from 2002 to 2004, free from their pension obligations to about 190,000 steel workers. Mr. Ross sold the steel assets to the Mittal Steel Company last month.
And it will add billions and billions to the government's (our) debt.

Posted by Dave Johnson at May 10, 2005 5:14 PM

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Comments

People are so docile. We never seem to notice we're getting screwed. The rich ALWAYS get to socialize their losses, whereas us real people are enslaved to them FOREVER. Simply because of their claims of ownership. Gimme gimme gimme. Cuz it says here you have to. And we do. We deserve to be shat on.

Posted by: richard at May 10, 2005 6:37 PM

Well with pensions they aren't just socializing their losses, they're STEALING THE PENSIONS and making the government pay them instead.

Posted by: Dave Johnson at May 10, 2005 6:47 PM

Gives new meaning to "ownership is theft". Nah, not really, same as always.

Posted by: richard at May 10, 2005 7:04 PM

Yeah, this just might, MIGHT, start waking people up. You KNOW that GM and Ford are keeping an eye on this ruling. And think how this plays with a push to cut/eliminate Social Security. Anyway...if this does NOT wake them up I doubt much will.

Posted by: jon st at May 11, 2005 5:35 AM

This is just the latest in a whole series of pension and healthcare benefit cuts/abandonments.

Questions:

Why do bondholders get preference over pensioners? Isn't a pension at least equivalent... part of the negotiated compensation agreement between the worker and his or her employer? How can a corporation retroactively and unilaterally renegotiate compensation, decades after the work has been done? If the workers had known their pensions would be trashed, isn't it possible that they would have demanded higher immediate compensation, or chosen to work elsewhere?

It seems like, in the Republicans world, some contracts (bondholders) are sacred, and others (pensions) are not.

That said, this points up three things:

a) a smart union demands the money from the company, and manages the funds itself

b) the law should be strengthened to prevent abuses like this, and to prevent underfunding of pension plans

c) like healthcare, pensions should be provided by the government, directly... if there were no way to evade these costs, United wouldn't be at a disadvantage relative to newer airlines without such plans

Posted by: Thomas Leavitt at May 11, 2005 9:53 AM

I agree. How can this be legal? The linked article about the United ruling included a quote from a retiree whose pension will be cut in half, and that includes the portion being made up by the pension agency.

I worry that most people with a rudimentary understanding of this issue just think United is going bankrupt and government is picking up the tab for the pensions. Do they realize that retired people are having their pensions cut in half and that they have no recourse whatsoever? I can't imagine being in a position where I had retired based on supposedly secure pension income only to have the rug pulled out from under me. Even people who were frugal and saved money for years can't cope with a 50% cut in their pension without seriously reordering their lives.

Lastly, I also agree that this is theft pure and simple. If those running United paid stock dividends or executive bonuses while simultaneously underfunding pensions that is a straight ripoff of working people, a swindle.

Posted by: Joe Bob at May 11, 2005 4:15 PM

How much are these CEO's making? Is their salary or pension payments being cut? If so (which I doubt)m by how much? If not then why not? I'm sure that I'm not alone when I say that I am really tired of this. For too long now, companies have been allowed to go bankrupt with the CEO's retaining all of their "Golden Parachutes" while the workers retain the shaft. In many cases the government bails out the companies but this never trickles down to the poor schmuks who lost their jobs or their pensions. The problem is that I have no idea what to do about it. Any ideas?

Posted by: Jane Algozzini at May 12, 2005 12:00 PM

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