Judge Affirms Ruling For United's Pension Plan Termination

July 25, 2005 (PLANSPONSOR.com) - Judge Samuel Der-Yeghiayan of the US District Court for the Northern District of Illinois affirmed a bankruptcy court's previous ruling that approved the Pension Benefit Guaranty Corporation's (PBGC) termination of United Airlines' pension plan for flight attendants.

The Association of Flight Attendants (AFA) challenged the bankruptcy court’s approval, saying United modified the terms of its collective bargaining agreement by entering into the agreement with the PBGC, according to a BNA report.   Der-Yeghiayan said the union made general complaints of unfairness and was unable to demonstrate any actual violations of the law by United or any violations of any portion of the collective bargaining agreement.

The judge affirmed the PBGC’s authority to terminate the plans, writing in his opinion, “The facts clearly show, as the bankruptcy judge concluded, that PBGC has authority provided to it by Congress to involuntarily terminate the pension plans if it sees fit despite AFA’s objections.”

A spokeswoman for AFA told BNA the union would ask for expedited consideration of its appeal of Der-Yeghiayan’s decision before the US 7 th Circuit Court of Appeals.

Both AFA and United accuse the other of not being willing to hash out an alternative to the pension problem.   While United wants to agree on a defined contribution replacement plan for the pension plan, the union says the termination of its pension plan is not acceptable.

In April, the PBGC agreed to takeover four of United’s pension plans with a total deficit of $9.8 billion.   The UA Flight Attendant Defined Benefit Pension Plan, which covers 28,600 participants was included in the agreement (See  United, PBGC Hammer Out Plan Takeover Pact ).   The plan has $1.4 billion in assets to pay $3.3 billion in promised benefits.