PBGC Files Brief Supporting Independent United Fiduciary

December 13, 2004 (PLANSPONSOR.com) - The Pension Benefit Guaranty Corporation (PBGC) has filed a brief in bankruptcy court supporting an independent pension fiduciary's motion to compel United Airlines to make more than $800 million in required pension plan contributions.

The PBGC brief points out that under federal law unpaid pension contributions in excess of $1 million are considered tax obligations and that obligations to a pension fund that come after a filing for bankruptcy have priority as administrative expenses, according to a press release from the agency. Therefore, the amount of United’s unpaid pension contributions has priority as both a tax liability and an administrative expense. Since United has not received court approval for modifications to its existing collective bargaining agreements with unions, it must honor the agreements by continuing to contribute to the pension plan, the agency argued.

“United Airlines’ pension debt is a legally binding obligation to its employees,” said PBGC Executive Director Bradley Belt. “Just as companies in bankruptcy must continue to pay current wages to their workers, they must also pay for the deferred wages earned by employees.”

United Airlines filed for Chapter 11 bankruptcy protection in December 2002. It has not made required contributions to its pension fund – which covers almost 119,000 employees and retirees – since before July (See United Skipping Fall Pension Payment ). In August, the company and the Department of Labor agreed to appoint an independent fiduciary to oversee the interests of the pension plan (See United, DoL Agree to Independent Fiduciary ). On November 30, the fiduciary filed its motion, which sought to give the unpaid contributions priority status as administrative expenses (See UAL Fiduciary to ask Court for $1B in Pension Contribs ).

The PBGC insures private-sector pension plans.