Pension Plans Not as Safe as Many Presume United Default Should Give Retirees, Those near Retirement Concern over Future
Orrick, Dave, Daily Herald (Arlington Heights, IL)
Byline: Dave Orrick Daily Herald Staff Writer
If the country's second-largest airline can back out of its pension obligations, are workers at other companies truly safe?
Of course not, experts say, and they haven't been for decades.
In the Chicago area in the last several years, a host of companies - ranging from Waukegan-based Outboard Marine Corp. to Northbrook-based General Fire Extinguisher Corp. to the Long Grove- based parent of Kemper Insurance - have declared bankruptcy and backed out of their promised benefits.
Still, bankrupt United Airlines' default on its pension underscores just how precarious traditional pension plans can be amid the national trend toward 401(k) and other non-guaranteed savings accounts and the Bush administration's push to reform America's only national pension plan, Social Security.
In Chicago on Tuesday, federal Judge Eugene Wedoff ruled that United's proposal to have a federally created agency take over its underfunded pension plans is legal, even though it means some workers and retirees, through no fault of their own, will see significantly reduced retirement stipends.
"Absolutely, everyone should be concerned," said Jack Metzgar, a professor and labor studies scholar at Roosevelt University. "When I saw this on the news, I thought ... it just seems like a huge step away from the kind of legal security (we thought) these things have had in the past."
Part of Metzgar's surprise was because not only were United's pensions insured by the federal Pension Benefit Guaranty Corp., the affected workers are members of powerful unions.
Those two forces have always been seen by labor groups as the reason why traditional American pension plans - employer-funded "defined benefit plans" - were generally superior to modern retirement savings accounts, such as 401(k) plans. And even though some United workers will see greatly reduced payouts, some won't see a change at all.
"This is the situation most likely to be secure," Metzgar said. …