Us Pension Agency Warns United On Payments

767jetz

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Aug 20, 2002
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Rampman said:
So 767jets please explain how this does not hurt me.
Because UA could then afford to set up a defined contribution (DC) plan to offset the loss of future pension accumulation. This is what USAirways did for their pilot's who had their pensions terminated.

For example, if you make $40,000 they might contribute and additional $4000 per year to a DC plan, that would grow similarly to your 401K. And that money is yours to invest as you see fit. Once it is earned it can never be terminated or taken away. With compounded interest this would be a nice nest egg if you have another 10, 15, or 20 years or more to go, and would supplement your PBGC pension and your 401K. An added bonus is that it is much more secure, and if you ever choose to change jobs, you take it with you and roll it over.

Pensions (DB plans) are expensive because the contributions required by the company reflect an estimated future liability based on current market returns. When the market tanked, the funds went from over funded to underfunded almost overnight. DC plans are paid every paycheck and are a defined amount. (Hence the name: Defined Contribution) The money is yours and the company doesn't have to worry about huge "makeup" paymayments when the market fluctuates down.
 

AAmech

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Aug 22, 2002
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DC plans are like a "Consolation Prize" and fall into the "better than nothing" catagory. Almost allways result in FAR LESS benifits than a "Defined Benift" plan.
 

mrfish3726

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Jul 7, 2004
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United is going to get the taxpayers to foot the bill out of BK one way or the other. If they cancel the pension, the tax payers would wind up paying about 5 billion of the 7.5 billion owed. Now they'll have two firsts to thier credit, biggest airline bankruptcy and worst default on a government gauranteed pension program. Now maybe someone will start to dig deeper and find out WHY UAL truely wound up in the position it's in. ENRON, Maybe!!!!! :shock:
 
Aug 20, 2002
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mrfish3726 said:
United is going to get the taxpayers to foot the bill out of BK one way or the other. If they cancel the pension, the tax payers would wind up paying about 5 billion of the 7.5 billion owed. Now they'll have two firsts to thier credit, biggest airline bankruptcy and worst default on a government gauranteed pension program. Now maybe someone will start to dig deeper and find out WHY UAL truely wound up in the position it's in. ENRON, Maybe!!!!! :shock:
You obviously are not familiar with the PBGC rules. The taxpayers won't be 'stuck' with $5bil in UA pensions.

Interesting that Randy Canale, the IAM rep on UA's BOD, is boycotting the current meeting. Great attitude Randy! You win a one-way ticket to knuckleheadland!

Will somebody please make Jake Brace go away???
 

mweiss

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Aug 28, 2002
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whatkindoffreshhell said:
You obviously are not familiar with the PBGC rules. The taxpayers won't be 'stuck' with $5bil in UA pensions.
The FSLIC rules also weren't supposed to stick taxpayers with the bill, but somehow we all ended up paying for it anyway. :huh:
 

WorldTraveler

Corn Field
Dec 5, 2003
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mrfish3726 said:
United is going to get the taxpayers to foot the bill out of BK one way or the other.
The taxpayers may get stuck with UAL’s pensions but I suspect the PBGC will fight tooth and nail against a distress termination and will only allow UAL to succeed at doing so when UA truly is on its way out of this world. The PBGC has got to be wishing they’d never allowed US to terminate their pilot pension plan and will use UAL as an example to make sure other airlines get the message that pension obligations will be paid as long as there is one breath of life left in the company. Given that the Hill is already talking about addressing the pension crisis in this country, there will clearly be pressure on companies to fulfill their obligations. The fact that lenders do not want to support a reorganization of UAL with its pension obligations presents a serious dilemma but it should be all that’s necessary to keep other airlines out of bankruptcy court.
 

FWAAA

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Jan 5, 2003
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AAmech said:
DC plans are like a "Consolation Prize" and fall into the "better than nothing" catagory. Almost allways result in FAR LESS benifits than a "Defined Benift" plan.
Whether a defined contribution plan results in smaller total benefits than a DB plan depends on the investment choices made; those who pick winners for their DC plan come out miles ahead. Of course, those who pick losers will wish they had a DB plan.
 

jimntx

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Jun 28, 2003
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whatkindoffreshhell said:
You obviously are not familiar with the PBGC rules. The taxpayers won't be 'stuck' with $5bil in UA pensions.
The taxpayers will be free of obligation only if the plan being taken over is fully funded at the time of takeover. I do not believe that is the case in this instance.
 
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mweiss said:
The FSLIC rules also weren't supposed to stick taxpayers with the bill, but somehow we all ended up paying for it anyway. :huh:
And that FSLIC crisis was twenty years ago! After HomeState & Marvin Warner stuck the feds the rules were fixed.

Folks, the PBGC & LTV Steel took seven years to reach a Supreme Court verdict which ultimately resulted in LTV's demise.

The PBGC is not some kindly grandfather figure sitting in the corner.

They've got lotsa smart lawyers and financial types who are not paid on commission like UA's vaunted banker friends JPMorgan & Citibank (BTW, remember those threads heralding the banker's confidence in UA??).

Here we go again, UA placing a huge bet on a blockbuster deal!

The PBGC is not just going to bend over.

And new investors are not going to pay off old pension obligations.

And Jake can't even sell DEN. So now whatcha gonna do?
 

Walmartgreeter

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WorldTraveler said:
The PBGC has got to be wishing they’d never allowed US to terminate their pilot pension plan and will use UAL as an example to make sure other airlines get the message that pension obligations will be paid as long as there is one breath of life left in the company.
It was the actual pilot reps at U that allowed the plan to be cancelled. The PBGC was probably very happy to get U's plan, as the level of funding, though below enough for full benefits (thus the termination) was more than enough to fund the small benefits given to most of the pilots. With a 3 year look back, a large majority of the pilots were given tier 4 benefits, about 28K a year without spousal reductions. There are probably a lot of steelworkers whose pensions are now more secure following the termination of U's plan. As to UAL, they may be 5B underfunded, but that is with full benifits. Just my two cents. Best. Greeter.
 

WorldTraveler

Corn Field
Dec 5, 2003
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Greeter,
You are correct that U's pension was not a financial disaster - and as you point out may have been a lifeline for the PBGC. My point is that, based on precedent, the PBGC cannot allow the airlines to start down the process of terminating pensions in the same way that happened at steel.
It is also noteworthy that the problems of the steel industry were due to foreign competitors and the US had an obligation to allow the steel industry to restructure in order to comply with international treaties. That is not the case with the airline industry; the competition airlines are facing is home-grown. Doesn't make it any less real....
 

Bear96

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Aug 20, 2002
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FWAAA said:
Whether a defined contribution plan results in smaller total benefits than a DB plan depends on the investment choices made; those who pick winners for their DC plan come out miles ahead. Of course, those who pick losers will wish they had a DB plan.
Great observation!

Please tell me which stocks are absolite "winners" to pick that are guaranteed to generate a great rate of return over the next 20 years so I can make wise investments for my retirement.

Thanks! (Gee this playing the stock market stuff is soooo easy!)
 

Walmartgreeter

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azdryheat said:
Don't know where you saw that PBGC got a good deal on the US Air pilot pension but here is a link. http://www.pbgc.gov/plans/usairways/questions.htm#2

PBGC estimates that it is 600 million short on this plan. UA would be much worse.
Guess I could be wrong. But the way I read it they are only liable for 600m with 1.2B or more provided by cash from the actual plan. I think they are spinning the figures here. Also. PBGC went back to the court and got MORE money from U after the inital termination. But I will not argue, as I am poorly qualified to read the numbers. Thanks for the link to the page, however. Greeter.