The Pension Benefit Guaranty Corporation (PBGC) announced Friday it will file anobjection in bankruptcy court to provisions in UAL Corporation’sdebtor-in-possession financing agreement. UAL claimed those provisions prohibit thecompany from making required pension payments.
In itsfiling, the PBGC will ask the bankruptcy judge to modify the financing agreement to complywith the Employee Retirement Income Security Act (ERISA). According to the PBGC, ERISA requires UAL tocontinue funding its pension plans unless the plans are either terminated orthe IRS grants a waiver of the minimum funding requirements
Thepension agency will also file updated claims totaling $8.3 billion on behalf ofpension plan participants in UAL’s four defined-benefit pension plans. The United plans cover almost 119,000 workers andretirees.
“United’s decision to stop funding its pension plans increases the riskof loss not only to the company’s workers and retirees but toparticipants in other plans insured by the PBGC,” said ExecutiveDirector Bradley Belt in a news release. “The bankruptcy court should reject this attemptto sidestep the statutory funding rules. Agreements between privateparties must not take precedence over federal pension law.”
Of the $8.3 billion in underfunding, the PBGC estimated thatit would be liable for $6.4 billion if all four plans terminated. The$1.9 billion difference represents the benefits that United’s workers and retirees would lose because they exceed the guarantee limits set byCongress.
In late July, Belt sent UAL a strongly worded demand for more information on how the company planned to make up the pension shortage. (See PBGC to United Air Lines: Show Us You Can Pay Your Pension Bills).