UAL Pension Update
DHP’s Pops just gave ol’ DHP his take on the courts’ action regarding United’s pension liabilities… it ain’t pretty.
Essentially the story goes like this:
The employees have pensions that are divvied up by their respective unions, i.e. pilots, flight attendants, mechanics, etc. The total liability that United had to these pension funds was $10 billion. The courts determined that United could shed its total liability in effort to try to get out of Chapter 11 bankruptcy, and the PBGC is picking up $6.6 billion of said liability.
That, on its face, is pretty craptastic… how United gets out of its entire unfunded pension liability is beyond me. But for the retired pilots, like DHP’s Pops, it is far worse. This is in part due to the fact that the $10 billion liability isn’t spread out evenly among the pensions of the various different unions. As it turns out, the mechanics’ and flight attendants’ pensions are under-funded to a greater extent than the pilot’s union. In fact, actuarial findings that the retired pilots came up with showed that the existing pilots’ pension was sufficient to cover the retired pilots at their current rates (active pilots are being switched over to a different retirement system regardless of the outcome of the existing pension system).
So, one might think that the government would discard the unfunded portions of the pilots’ pension since they can do ok on their own with their current funds, and take on a portion of the liability of the other unions’ pensions on a similar case-by-case basis.
One might think.
Unfortunately, one would be totally wrong. Instead, the government wanted to take all the unions on regardless of how the retired pilots might be sitting. When the federal insurance does that, they not only assume a portion of the liability, they also take all the existing assets! This means that the retired pilots, who were just fine on their own, got 100% of their pension guarantee taken away and replaced with the federal limit under the federal insurance program, which is about $50k per year. This represents an entirely unnecessary cut of the retired pilots’ pension by about a third. The mechanics and flight attendants unions, who aren’t ok on their own because their pensions aren’t as robustly funded, appear to make out ok under this deal… the federal pension limit of $50k is a lot closer to their normal pension than it is for the pilots, so effective the government is robbing Peter (the pilots) to pay Paul (the mechanics and flight attendants). This wasn’t an accident; the government approached the courts specifically requesting to take on the pilots’ pension in addition to the others.
Furthermore, the retired pilots never got a say in any of this… the pilots’ union wouldn’t represent them, and the court would not allow the retired pilots’ representatives standing in the proceeding. Thus, the retired pilots never had any sort of representation… in light of that, it isn’t too hard to see how the retired pilots got absolutely screwed.
I know nothing about corporate law, but it seems to me that would form some sort of basis for an appeal or a lawsuit by the retired pilots. I should also make the caveat that this is based on my conversations with my father and a few general new reports on this topic; thus, I certainly recognize that I am not a definitive source of information and most likely don’t have the entire picture. However, in light of cases such as this (which is the largest pension default in history) and Enron, I am just aghast at the lack of oversight and lax rules on pension funding, and similarly bewildered that there are folks out there shilling for individuals to take on even more risk via privatization of social security.
More on this as I wade through material...
P.S.: And today is DHP's Pops B-Day... some present, eh?
0 Comments:
Post a Comment
<< Home