Magazine article Workforce Management

Pension Peril

Magazine article Workforce Management

Pension Peril

Article excerpt

It's clear from the United Airlines action that no private pension is really safe.

WANT TO DEMORALIZE and marginalize a large and once-vibrant workforce? Here's the recipe:

* Take a major player in a mature industry;

* Saddle it with a high-cost structure built up over many years of matching what the other guys did;

* Mix in several generations of bad managers making shortsighted decisions;

* Deregulate;

* Engage in a never-ending price war with lower-cost competitors;

* Systematically penalize your best customers with red tape, high prices and dumb rules;

* Demand that employees take pay cuts in exchange for profit-sharing and better pension benefits;

* Bake for 15 years, then file for Chapter 11 bankruptcy protection and get a court to let you dump the pension obligations on the federal government.

Sound familiar? It should, because it happened at United Airlines, where last month the company got court approval to unload $6.6 billion of pension obligations for 120,000 current employees and retirees on the Pension Benefit Guaranty Corp. (translation: the federal government) and, ultimately, American taxpayers.

The United story got me thinking about my wife's friend who is a United Airlines ticket agent in Honolulu. Back in the mid-1990s, when I lived in Hawaii, I remember commiserating with her about the latest round of salary reductions United employees were then taking to save the airline. "I don't like it," I recall her saying, "but the tradeoff is that I am getting profit-sharing and a better pension. I may be losing money now, but I'll get it back when I retire."

Her plan sounded good, but not anymore. Now that the airline has pushed its pension obligation off on the PBGC, current and future United retirees will get no more than $45,600 a year in retirement. One former United pilot told The Christian Science Monitor that his six-figure pension will probably drop by about 75 percent. …

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