woodstock
Final Approach
wow. I'm speechless. so we're all paying for it now.
http://www.nytimes.com/2005/05/11/business/11air.html
http://www.nytimes.com/2005/05/11/business/11air.html
United Air Wins Right to Default on Its Employee Pension Plans
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Brian Austin
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poadeleted3
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It's an absolute and deliberate betrayal. None of the people running that airline who are destroying the lives of their employees will be feeling a money pinch. The employees would be within their rights to strike or quit, leaving this airline to go down. If they don't, they are accepting this, and have no room to complain, IMHO.
Gary
En-Route
Joe Williams said:
Agreed. Now the "me too" syndrome will occur. Delta, NWA, AA will all plead that United has a competitive advantage and will also request being relieved of their obligations. Bethlehem Steel led the way in manufacturing, now United and US Air are showing the way in aviation.
Do have a question - where does the Federal Pension Board receive its funding? General revenue or a specific fee/tax on business?
Gary
bstratt
Cleared for Takeoff
GM will be next to "renegotiate" pensions and benefits for retirees!
There are quite a few companies who in the good years promised defined benefit pensions and benefits that now have seriously underfunded plans.
There are quite a few companies who in the good years promised defined benefit pensions and benefits that now have seriously underfunded plans.
woodstock
Final Approach
how can anyone talk about privatizing Social Security with a straight face, with this kind of stuff happening?
betrayal - right on. could you just imagine working your whole life for a company and then being told "oops, we cannot pay your pension".
do the big guys even have a clue how the people, who actually make the companies run, live? what they are going through?
betrayal - right on. could you just imagine working your whole life for a company and then being told "oops, we cannot pay your pension".
do the big guys even have a clue how the people, who actually make the companies run, live? what they are going through?
woodstock
Final Approach
bstratt said:
underfunded sounds like there is intent involved.
poadeleted3
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woodstock said:
If anything, this speaks out even more strongly for privatized pension plans that individuals have control of. The people affected by the United pension fiasco are at the mercy of their company, just as those of us facing having our Social Security benefits that we are paying for destroyed are at the mercy of the government. Both cases call out for individual control of independent pension plans. United employees trusted their company to maintain a pension plan they were promised, and those of us forced to pay into Social Security hope for a pension plan we were promised. Neither those who trust in companies like United nor those of us looking for the promised Social Security payouts will get what we've paid for. The ONLY solution is privatized retirement plans.
BTW, I don't have to imagine paying for a pension plan all my life, then being told "oops, we cannot pay your pension". That is the reality of Social Security for both me and you, unless you are considerably older than you look in your pictures.
EdFred
Taxi to Parking
Why should any company be required to pay a pension after you leave? My company certainly isn't going to do that when I retire. No company I ever worked for provided that. If I wanted to retire, then I saved my own money. It's not like a 30 year captain is hurting financially. (Yes I know, not everyone is a 30 year captain.) Pensions, social security, other retirement plans where the beneficiary does not play an active role (i.e 401k, SEP, or other programs) should be done away with.
woodstock
Final Approach
Joe Williams said:
but I see the privatization as just another name - same govt running it. (for as much as they have told us).
Joe Williams said:
well, I'm older than you but I hope not considerably older!
but thank you for the compliment.
Skip Miller
Final Approach
bstratt said:
Don't be deluded that this mess stops at the corporate plans. I know of at least one state defined benefit pension plan that is woefully underfunded, down near 80% of the amount they need. I am confident that there are many more. The protections of ERISA, that force companies like United to announce and address their pension shortfalls, do not extend to governmental plans.
When the brown matter meets the ventilator, the states involved have but two recourses: raising taxes, or declaring bankruptcy as the only way to abrogate the pension obligations that are now backed by the full faith and credit of the government entity. Pack you bags, time to move!
And just to add a thick layer of icing to that cake: In the state of which I have direct knowledge, the guaranteed-for-life retiree health care package is not funded at all. It's purely pay-as-you-go from the state budget.
-Skip
ps: Not trying to be coy. It is Connecticut. I used to work in the Pension Fund Management division of the State Treasury. The information is public but you can be sure it is not advertised or highlighted.
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poadeleted3
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N2212R said:
They should do it because they agreed to do it, and it was part of the compensation they promised their employees for their work. You work for a company that does not do so, so they don't owe you anything. However, there are plenty of companies who promise pension benefits as part of their overall compensation package. Mine does, for example, but I don't contribute money to it purely because of isntances like this and Enron. I'm glad to watch my account grow as the company contributes to it, but I'll keep my cash seperate and under my control.
bstratt
Cleared for Takeoff
Skip Miller said:
City of San Diego
bstratt
Cleared for Takeoff
woodstock said:
No, blame actuaries and forecasts. Ability to pay future benefits depends on projected life expectancy, as well as returns generated on invested funds. In the boom 80's & 90's investments were in the stock market and earning big returns. Companies/States/Cities promised bigger pensions/benefits as it was "free", i.e. funds had the paper balance to cover.
Life Expectancy increases, increasing the pension draw requirement, coupled with rising benefit costs to cause the rising life expectancy means firms now have to have more money invested to cover. Now halve the value of your fund due to stock market declines, wow! big deficit overnight. Your fund is now "underfunded".
corjulo
Line Up and Wait
Joe Williams said:
Joe
I'm stunned. You sound almost.... down right democratic. My gosh we completely agree. But this isn't new to a whole lot of Americans, except in the size of the company. I lost my pension last year, as well as retirement health care and boat load of other promised benefits. I feel sorry for them but this is the America we live in, get used to it. At least they have the 2/3 thirds they're still promised and their Social Security...Maybe
Skip Miller
Final Approach
woodstock said:
Not necessarily, if by intent you mean something underhanded. When a company agrees to start a pension plan, it generally agrees to contribute the large sums of money necessary over many years. So it is by definition underfunded from the get-go, until that magic day in the future when it is properly funded.
Far more common, is a shortfall in investment returns. A company has a pension fund valued at X, and it knows that its future payouts will total Y in today's dollars. X is almost always less than Y. But the plan is not considered underfunded if investment income on X will make up the difference, between now and the time Y must be paid. Now Wall Street takes a dive and the formerly fully funded plan is underfunded. The company is required by ERISA to make up the shortfall. The company cannot because their business is doing poorly and they don't have the money (read United here) so they seek bankruptcy protection ... because they are in fact bankrupt at that point.
Note that a lot of shenanigans may occur with determining what interest rate to apply to X, and to calculating how big Y is. How long are those employees going to live? When are they going to retire? Sure, our investment managers can earn that much. The list of variables goes on. In reality, the actuaries take a reasonable cut at it, the external auditors and (I presume) the PBGC examine it and pronounce it satisfactory. Unfortunately, the market she's-a go up, anna market she-a go down.
So there may in fact be no underhandedness going on here. In United's case I do not have the facts so I am not saying yes or no.
-Skip
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rpadula
En-Route
Sure there's intent involved, but it isn't necessarily "let's screw people outta their pensions."woodstock said:
Defined benefit plans got underfunded for two reasons:
1. Plan managers erroneously increased their expected future returns on fund investments, thanks, in part, to the boom years. If you have to pay a fixed amount to a retired worker 30 years from now, then you can set aside less today if you can grow the fund at a higher rate.
2. Setting aside less today helps this quarter's bottom line, which in the current highly stock-compensated world, is desired.
It's a short-term vs. long-term thing.
-Rich
corjulo
Line Up and Wait
Joe Williams said:
Aw, The universe is returned to balance, we completely disagree of these points
Private accounts, as structured by the presidents plan, put you at the mercy of the fund manager and at the strength of the company selling you the annuity you're forced to buy at retirement. I think you better study the presidents plan a little closer...Its a dog
Keith Lane
Pattern Altitude
And then there's this from Polaroid.
Retirees (around 6,000 of them), some with 40 years of service get a one time payout of $47.
Management, top two guys who have been there less than 4 years, get $21Million between them.
Lessee, 6,000X$47=$282,000.
$21Million / 6,000=$3,500.
Why would a bankruptcy judge allow this to happen? I could run a company out of business faster and for around half that kind of payoff. I'd even promise not to ever do it again.
http://www.boston.com/business/globe/articles/2005/04/27/polaroid_sale_worth47_to_each_retiree?mode=PF
One of them was Jacques Nasser, the Aussie that ran Ford for a while. I'm sure he really needs the cash.
Hmmm
Retirees (around 6,000 of them), some with 40 years of service get a one time payout of $47.
Management, top two guys who have been there less than 4 years, get $21Million between them.
Lessee, 6,000X$47=$282,000.
$21Million / 6,000=$3,500.
Why would a bankruptcy judge allow this to happen? I could run a company out of business faster and for around half that kind of payoff. I'd even promise not to ever do it again.
http://www.boston.com/business/globe/articles/2005/04/27/polaroid_sale_worth47_to_each_retiree?mode=PF
One of them was Jacques Nasser, the Aussie that ran Ford for a while. I'm sure he really needs the cash.
Hmmm
woodstock
Final Approach
Keith Lane said:
surely you are joking. why even bother to give them 47 bucks, that's more of an insult than saying "you're getting bupkiss losers".
sure, CEOs should make good money, but when the bankruptcies happen (especially if it is on their watch) they should be stripped to the bone just like everyone else in the company.
Dave Krall CFII
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Dave Krall CFII SEL SES, Cmcl HELI
Soon, not only cynical S.O.B.s will do all their own investing.
At least my medicare payments go to my parents benefit checks.
At least my medicare payments go to my parents benefit checks.
Anthony
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Anthony
corjulo said:Aw, The universe is returned to balance, we completely disagree of these points
Private accounts, as structured by the presidents plan, put you at the mercy of the fund manager and at the strength of the company selling you the annuity you're forced to buy at retirement. I think you better study the presidents plan a little closer...Its a dog
Dan, this is absolutely false. The President's (that's capital "P" President) plan is for totally VOLUNTARY private accounts. Meaning, you do not have to participate if you don't want to. You can elect to just keep everything in the existing SS system and not own your funds. Also, the few funds availabe will be very conservative including guaranteed Money Market funds which of course will most likey get much less of a return than stock funds, but there's practically no risk either. And, only a small percentage of the your total SS contribution can go to the private funds. You've been reading the misleading Democratic talking points again, huh?
If you want to let the gov't keep stealing your money with no ownership rights involved, then go ahead, but let the rest of us CHOOSE to do otherwise.
poadeleted3
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woodstock said:
DING! DING! DING! We have a winner!! A successful executive deserves all the perks and pay the shareholders want to give him/her. A failure who destroys the lives of the company's workers and the company should be considered lucky to be able to afford a twenty year old mobile home after the courts finish stripping him/her.
Len Lanetti
Cleared for Takeoff
woodstock said:
One is defined benefit the other is defined contribution.
Len
wsuffa
Touchdown! Greaser!
woodstock said:
Actually, Beth, it all follows. The companies made promises they can't keep, and are now changing the rules/defaulting. The Government made promises it can't keep (Social Security) and it's now changing the rules/defaulting.
It's all well and fine to make promises when you want to hire somebody or you want to get elected. The beneficiaries don't look far enough at the "what-if's". And the folks that created the benefits in the first place are long gone when the bottom falls out. As the CEO of a company I worked for once put it: "I intend to be retired by the time things change". And he walked with enough money to not have to worry about it.
BTW, the public is not very aware right now of the potential for a big stock market drop as baby-boomer retirees with money in equities retire and draw on that investment. It will require them to sell stocks. Scholars disagree on the impact, but the potential is there.
No. And I'd extend that to politicians that make laws and dole out taxpayer-funded benefits.
I am of the firm belief that some "big guys" give lip service to education - they'd be just as happy if folks were not well educated so the public will simply believe what they're told and follow blindly. Just my opinion, of course.
wsuffa
Touchdown! Greaser!
woodstock said:
Sorta. The accounting world allowed use of a formula for contributions that permitted companies to contribute less when the stock market was doing well. As the stock market returns dropped, the retirement funds did not have enough money in them (due to said forumla) to ensure full benefits at retirement.
wsuffa
Touchdown! Greaser!
Joe Williams said:
Agree.
When I started my first business, my partners and I took the financial hit to make sure we could hit payroll each month. We suffered - not the employees.
Same should apply to larger companies.
gismo
Touchdown! Greaser!
Keith Lane said:
Who do you suppose was paying the laywers to negotiate the bankruptcy? The pensioners or the executives?
Ed Guthrie
Cleared for Takeoff
lancefisher said:
All three (you forgot the creditors/shareholders)--that's the way bankruptcy works.
Arnold
Cleared for Takeoff
Gary said:
The Pension Benefit Guarantee Corporation http://www.pbgc.gov/default.htm collects a premium from the pension plans they insure.
It should also be noted that the funding levels for pension plans are primarily a function of the tax laws, (26 USC § 401 et seq.) which regulate underfunding AND overfunding AND discriminatory funding (well paid employees v. not so well paid employees).
The regulations are almost as fascinating as the code itself
Arnold
Cleared for Takeoff
Ed Guthrie said:
There are basically two parties in a bankruptcy, the debtor (UAL) and the creditors (everyone to whom UAL owes money, goods or services). The employees are simply unsecured creditors HOWEVER they do have some limited protections not afforded other unsecured creditors, for example, the company cannot easily abrogate the collective bargaining agreements as they could during the Frank Lorenzo era (EAL, CAL, NY AIR, People Express - are some of Mr. Lorenzo's notable late 80's - early 90's bankruptcies). However, with court approval they can be relieved of their contractual obligations.
Creditors are spending considerable resources trying to protect their interests and the debtor is spending considerable resources trying to remain a going concern by minimizing the amount of debt it must ultimately repay.
The next few years in the airline industry are going to be very ugly for employees and shareholders, - bankruptcy lawyers should do fairly well.
gibbons
En-Route
Arnold said:
Whew! I know I'll sleep better knowing the attorneys are well fed.
woodstock
Final Approach
gibbons said:
well, of course, the new bankruptcy bill - the Lawyers Relief Act of 2005.