Measure Could Avert Airline Pension Dumps

By Marquez, Jessica | Workforce Management, June 2005 | Go to article overview

Measure Could Avert Airline Pension Dumps


Marquez, Jessica, Workforce Management


JUST DAYS BEFORE United Airlines and the Pension Benefit Guaranty Corp. announced an agreement to terminate the airline's pension plan, a bill was introduced that may save other airlines from the same fate.

On April 20, Sen. Johnny Isakson, R-Georgia, presented the Employee Pension Preservation Act of 2005, which would allow airlines to spread the funding of their pension plans over 25 years, instead of the current four, as long as they freeze new benefit accruals or pay for them upfront. The bill, which was co-sponsored by Sen. Jay Rockefeller, D-West Virginia, would require airlines to get union approval before taking this action.

The proposal is particularly welcomed by the airline industry, given the uproar in the wake of United Airlines' decision to terminate its pension plan. On May 10, a U.S. bankruptcy judge approved the airline's plan to transfer all four of its underfunded pension plans-amounting to $9.8 billion in liabilities-to the PBGC. The termination has been met with fierce opposition from unions, which have threatened strikes.

Andrea Newman, senior vice president of government affairs at Northwest Airlines, says the bill would help airlines avoid going into bankruptcy and having to renege on their promise to workers. "United has shed enormous liability, and what you would expect to happen is that more legacy carriers will have to do the same thing," she says. Northwest's plan is underfunded by $3.8 billion.

Delta Airlines, which worked closely with Isakson's staff on the proposal, sees the bill as essential, says Benet Wilson, a Delta spokeswoman. Delta froze its defined-benefit plan, which is underfunded by $5.3 billion, to new employees in 2003 and just last month warned that it expects to report substantial losses for the rest of the year and could be forced to seek bankruptcy court protection. …

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