>The Pension Benefit Guaranty Corporation (PBGC) said in a news release that it was moving to take over the Ground Employees’ Retirement Plan, which the agency said was 30% funded, with $1.2 billion in assets to cover $4.1 billion in benefit promises.
>Of the $2.9 billion shortfall, the PBGC said it will guarantee payment of an estimated $2.1 billion as the plan formally ended Friday. The PBGC charged that the air carrier did not make $363 million in required contributions to the plan and that by moving to assume the United plan now, the agency said it saved itself at least $225 million in extra losses.
“The decision to end a pension plan is never an easy one,” said PBGC Director Bradley Belt, in the news release. “But we must do everything we can to preserve our ability to pay benefits to the more than 1 million Americans who depend on us for their pension benefits. This is especially true in light of the (pension agency’s) current deficit.” The PBGC currently has a $23 billion deficit (See PBGC Posts Record Deficit in FY2004 ).
>A United spokeswoman told Reuters that the company was still studying the latest development. United has insisted repeatedly that it needs to close its four plans for the sake of its corporate financial future (See United Makes Formal Pension Demise Request ). “We are studying the PBGC’s actions and are evaluating options,” said United spokeswoman Jean Medina. “We continue to believe that termination and replacement of all our defined benefit pension plans is necessary.”
>The PBGC in December asked for court permission to take over the underfunded retirement plans of United’s pilots (See PBGC Takes Over United Pilot Pension Plan ). If a judge approves the proposal, United would be free of any duty to contribute to the pilots’ pension plans. In recent congressional testimony, the PBGC estimated that United’s total underfunding stands at $8 billion. If all four of its plans are terminated, the government would be responsible for insuring $6 billion in benefits.
>Last month, the government assumed remaining pension plans at US Airways, which is also restructuring in bankruptcy (See PBGC Takes Over Three US Airways Pension Plans at $2.3B Cost ).