Without showing at least a trace of
embarrassment, United Airlines has done
what a bad in-law may have done to us
once in our life; slipped us the bill. Now
Uncle Sam will be subsidizing pension
plans that an incompetent airline
promised and then reneged on. When will
it end? Can you imagine this happening
with a very large company?
Let’s take a look at IBM as an example.
There are over 800,000 pensioned
IBM’ers. What if IBM deciding to cancel
their pension plan and the US Government
in their great wisdom and concern
decides to pick up that check. Simple
arithmetic tells us that the cost will be in
the range of $32.0 billion annually without
counting administrative costs. No problem….
we taxpayers can handle it. But at
least IBM’s pension costs are diminishing
each year as the self-funded plans begin to
kick in and current retirees go to the great
retirement home in the sky. Now leading
business-pundits tell us that the US auto
makers who also have given away the farm
in pension benefits to their union work
force may eventually look for hand-outs.
The paragraph above describes both
the problem and the solution. Overly rich
employer funded and managed pension
plans are the problem and self-funding is
the key. It is not the job of the US taxpayer
to be funding private pension plans;
hell, this writer believes it is not even the
job of US taxpayers to be paying public
pension plans. Every worker should selffund
their own plan with the firm having
the option of being a contributor, but not
the owner of the plan.
Does this sound a little rough around
the edges? Perhaps so; but how long can
tax revenues cover every stupid mistake
that a firm makes, and how long can tax
revenues cover the overwhelming legacy
of public pensions? New York City alone
will have a $34 billion dollar pension bill
next year. In 2000, the first year New York
City set aside separate monies it was $650
Million. In the year 2000, pension costs
were less than 1% of the City budget, now
they are projected to be 12%. That is 52
times higher than it was only 5 years ago.
Now the big question; how long can we
expect tax revenues to be funding pension
plans that are well beyond the wildest
dreams of most private employees?
What about the United mess? United
Airlines, which is operating in bankruptcy
protection, received court permission to
terminate its four employee pension
plans, setting off the largest pension
default in the three decades that the government
has guaranteed pensions.
The ruling by Judge Eugene R. Wedoff
of Federal Bankruptcy Court came
after a lengthy hearing in a crowded
Chicago courtroom, near where United is
based.
Despite pleas by union lawyers, Judge
Wedoff sided with United, which had
insisted that it could not emerge from
bankruptcy protection with its pension
plans in place.
The ruling releases United, a unit of
the UAL Corporation, from $3.2 billion in
pension obligations over the next five
years. The federal agency that guarantees
pensions, the Pension Benefit Guarantee
Corporation assume the responsibility for
the plans, which cover about 134,000 former
employees.
Along with raising that prospect, the
action has significant implications for the
airline industry, which has lost more than
$30 billion since 2000, and perhaps for
other industries like automobiles, with
similarly heavy legacy costs.
Analysts have predicted that if United
won its case, there could be a domino
effect as other airlines are forced to seek
bankruptcy protection to bring their pension
costs down to United's levels. That
move would probably swamp the 30 year
old pension agency.
But not to worry, we taxpayers will
just have to dig a little deeper. |
