United Pension Payment Decision on the Horizon

October 7, 2004 (PLANSPONSOR.com) - A decision about the fate of United Airlines' pension plans should be made within two months, the air carrier told employees this week.

The statement came as part of a pension primer letting employees know what would happen if United replaced its pension plans with another retirement plan, such as a 401(k), the Chicago Tribune reported. In the pension primer, the airline said that most current retirees would not see dramatic reductions in their monthly pension payments if the company migrated to a new retirement plan. The pension decision will come as part of a proposed new business plan for the troubled airline.

A United court filing accused the International Association of Machinists and Aerospace Workers of instigating “a hornet’s nest of litigation” to force United to make pension payments into the plans, which the government estimates are underfunded by more than $8 billion, and which the company has said it “likely” will terminate. United stopped making payments into the pension plans in July, after it was denied a federal loan guarantee that would have helped it out of bankruptcy.

United defended its decision to stop making pension payments, saying it is legal because the carrier is in bankruptcy. United also argued in its filing that it has been open with the machinists union about its pension decisions.

The Pension Benefit Guaranty Corp., a quasi-governmental agency that insures private-sector pensions, said that it is illegal to miss payments during bankruptcy. Payments can be missed only if plans are terminated or if the Internal Revenue Service has granted a waiver, pension agency spokesman Jeffrey Speicher told the newspaper.