Government to take over UAL pension plans

The federal Pension Benefit Guaranty Corp. will assume United Airlines’s pension plans:

The federal agency that protects workers’ pensions reached a tentative settlement Friday with United Airlines that allows the carrier to shift $6.6 billion in pension obligations to the government.

United’s unions called the deal an effort to sell out workers. If their plans are taken over by the Pension Benefit Guaranty Corp., most will receive thousands of dollars less than they were counting on because the maximum the agency now pays is $45,613 a year.

After a bankruptcy court hearing Friday, Jake Brace, United’s chief financial officer, hailed the agreement as removing a hurdle in the carrier’s efforts to leave bankruptcy protection. United estimates it will save $645 million annually by shedding its pension costs.

Once the deal is completed, it will be presented to U.S. Bankruptcy Court Judge Eugene Wedoff in Chicago. Even if he approves it, United has to go back to court to persuade him that it cannot afford the pension plans. That hearing is scheduled for May 11.

United’s pension plans are underfunded by $9.8 billion, but that entire obligation would not be transferred to the government. Because pension recipients typically receive less money once their plan shifts to the government, the agency said it expects to pay $6.6 billion to the airline’s employees. It would be the largest obligation the agency has ever accepted.

Well, let’s see. This plan will screw United Airlines pension recipients and companies that have insured pension plans (since their premiums will undoubtedly rise to cover this) i.e. competently-managed, successful companies to whose benefit? Mostly United Airlines management (since that’s who holds the most stock) and current United Airlines employees. Arghhh.

Another pension plan bailout of many, I’m afraid. I’m still trying to figure out how this reconciles with “the ownership society”. When you indemnify incompetent managers for their lousy judgment over a period of thirty years, that’s not ownership. That’s nationalizing losses and privatizing profits.