Company Pensions in Trouble

05-10-2005, 05:49 PM

A federal bankruptcy judge approved United Airlines' plan to terminate its employees' pension plans on Tuesday, clearing the way for the largest corporate-pension default in American history.
This will shift the burden for these pension over to the federal government.
What makes this so infuriating is the CEO of UAL made over 1.5 million last year and has a guaranteed pension of 4.5 million
This isn't a political issue it's an issue of what's right and wrong.
Pensions are generally considered part of an employess compensation package and now, as has already happened to employees of Enron and WorldCom, hundreds of thousands of hard working employees get cheated out of their retirement.
Here is the link to the entire story

Pension

Thumper · 05-10-2005, 06:57 PM

Quote:

This isn't a political issue it's an issue of what's right and wrong .... hundreds of thousands of hard working employees get cheated out of their retirement.

Stew --- Neither statement is true. This is not a political issue, nor is it an issue of what's right and wrong. It is a complex economic issue, one that was dramatically complicated by 9/11.

And hundreds of thousands of hard-working employees will not get cheated out of their retirement, as the United Airlines plan is a "defined benefit" type of plan (the most common plan employed by large corporations). That is the purpose of the Pension Benefit Guaranty Corporation. Most earned benefits for plans of this type will be paid out under the program, and the overall impact to affected employees, while significant, should be minimal. That is precisely why the corporation was established by ERISA in 1974.

This is not to minimize the size of the problem. But arm-waving is not going to solve anything.

05-10-2005, 07:37 PM

Jack...Jack...Jack

If 9-11 has complicated things so much why is it UAL was operating in the black as recently as 2002????
The Pension Benefit Guaranty Corporation is the federal insurer of these pensions and if other failing corporations decide to follow suit who do you think is going to foot the bill? The American taxpayer that's who!!!! The actual payout of pensions could get cut as much as 25%

I'm surprised a conservative like you would take the attitude you are.
Jack why no comment about CEO Tilton and his huge salary and guaranteed 4.5 million dollar pension?
If my pension were run by my former employer instead of a union trust fund where it cannot be touched I would be doing a hell of a lot more than arm waving.
This is another slippery slope and folks better hang onto their wallets

Thumper · 05-10-2005, 08:02 PM

Quote:

Jack...Jack...Jack

If 9-11 has complicated things so much why is it UAL was operating in the black as recently as 2002???? ... Jack why no comment about CEO Tilton and his huge salary and guaranteed 4.5 million dollar pension?

Stew --- If you believe that 9/11 has not affected the profitability problems of the airlines, you are missing an important point. 9/11 (2001) was directly responsible for much of the profitability erosion of the nation's airlines, impacting heavily first in 2002, obviously.

Regarding the CEO, United's Tilton received salary payments totalling $756,832 in 2004, plus a bonus of $366,393. In August of that year, he accepted a salary cut to $712,500 from $845,500.

In 2005, Tilton will get a salary of $605,626, a further 15 percent cut from the August 2004 level.

Do you believe that salary level is exorbitant for the CEO of a large US airline?

Just_learning · 05-10-2005, 08:12 PM

Didnt the goverment give the airlines a "butt load"(sorry Napolean Dynamitis) of money as a financial bail out so they wouldnt go bankrupt a few years back? Why does this idiot who cannot successfully run a company get a huge pension while people down the ladder get crapped on? Says something about our government when a guy who makes a million plus a year is paying less taxes than most of the people on here struggling to do a decent job or raising a family.

I can tell you what, if my retirement and pension got taken from me and I was a few years from retirement lets just say with nothing to lose....youve got nothing to lose, and the people i deemed responsible would get a size 12 in their keister. Wanting to be a millionaire has its perks, but the way there really sucks.

05-10-2005, 08:12 PM

So why doesn't Tilton take a cut in his pension?
Jack I never said that 9/11 didn't impact the airlines but why, once again, should the rank and file be forced to bear the brunt?
Tilton and other CEO's don't seem to be suffereing much at all but they want their pilots, flight attendants and mechanics to take it in the shorts!
You think this is right?

Cool Texan · 05-10-2005, 08:33 PM

Seems to me his pension is in lieu of a materially higher salary.

Just one more example of the need to diversify your retirement funds in order to mitigate risk.

Thumper · 05-10-2005, 09:38 PM

Quote:

So why doesn't Tilton take a cut in his pension? ... You think this is right?

Yes I do.

Tilton's $4.5 million pension was negotiated to be a fully funded, unbreakable package when he joined United in September 2002, which incidentally was just three months before the airline filed for Chapter 11. In order to join United, Tilton walked away from a multi-million dollar pension package at ChevronTexaco, where he served as vice chairman.

Tilton did nothing to create the problems at United Airlines. He negotiated a smart incoming package and gave up a lot of money to join United. Do you believe that was unfair? Or is it just easy to pile on the CEO?

Gus Orviston · 05-10-2005, 09:39 PM

I was scared this was going to happen, on the bright side at least it was totally raided by the corporation and it is all gone!

How does it work, you vested dollars are now managed by the government? Future vestings?

I have always toyed with the idea of leaving my corporation and so I can move my funds outside the company into an IRA or something. Then return once the money is tucked away. Not sure if that would solve anything, but there has to be away to protect your vested $ in such a case.

gus

05-10-2005, 11:06 PM

Quote:

Do you believe that was unfair? Or is it just easy to pile on the CEO?

Damn right it's unfair after what he did to the employees of UAL! He asks the employees to sacrifice, actually doesn't even ask. He and the board of UAL took the cowards way out at the expense of alot of good working people.
This guy is really not much better than Ken Lay of Enron. It also sets a precedent for other companies to follow

So Jack, are you alright with what UAL did to their employees and the potential of what this kind of stuff is going to cost the American taxpayer?

MacEFL · 05-11-2005, 02:21 AM

:lurk:

deefly · 05-11-2005, 05:05 AM

Stew, Stew, Stew: Now you know what makes this country go round! And this makes the Presidents proposal to have "individual" accounts with unfunded money make more sense! After all, the taxpayer will pick it up! Seriously, I think the real loss here is national confidence in the integrity of the "system", creating division, not unity among the people. IMHO this present administration is NOT a unifier! Its a divider. If people cant see this...well...thats a shame on us Americans!

Thumper · 05-11-2005, 05:26 AM

[/quote]Damn right it's unfair after what he did to the employees of UAL! So Jack, are you alright with what UAL did to their employees and the potential of what this kind of stuff is going to cost the American taxpayer?

[/quote]

Not at all. And I am also not alright with what happened on 9/11. It is a truly sad day in America. The disaster among our airlines is a direct result of the events that occured on 9/11/2001. The airlines, already in trouble before the twin towers came down, were pushed over the brink by that event.

The American taxpayer is being asked to cover another cost of a war that we did not start. I think that your anger is entirely justified. But it is misplaced.

I would be interested in learning what alternatives you would suggest to our airlines, assuming that you want them to keep flying. I have several good friends who are United pilots. They would like to hear your ideas.

Again, this is not a political issue. On that, Stew, we do agree. I think.

Blackjack · 05-11-2005, 06:08 AM

It seems that the large airlines are treated with much differently that the smaller (and profitable) competitors. I know air travel is critical to the country but special protection and treatment to help bail them out on a regular basis is really getting old. Pension bailout is really a low blow to the hardworking employees and taxpayers that will pay the price.

What really concerns me is the precident this will set for other companies and industries that want to get bailed out as well. It looks like the first boulder breaking loose in an upcoming landslide if this is allowed to go through.

Thumper · 05-11-2005, 06:25 AM

Quote:

What really concerns me is the precident this will set for other companies and industries that want to get bailed out as well.

Do keep in mind that this is not a freebie for United or other airlines that may be forced to go this route. The government (the U.S. taxpayer) will pick up a potential long-term liability of $6 billion, but receives $1.5 billion in assets, mostly as United stock and convertible notes. In a very real sense, the U.S. taxpayer is suddenly a very substantial owner of the company. I doubt that other troubled companies are lining up to frivolously join United.

A plus is that this action will likely allow United to emerge from its Chapter 11, allowing those planes to keep on flying.

GRUMPYR · 05-11-2005, 07:15 AM

Quote:

Do you believe that salary level is exorbitant for the CEO of a large US airline?

I certainly do!!!! :depressed:
For a little perspective just look at the salary of the head one of the largest organizations in the free world.
An organization with more employees, power and influence than any to have come before it.
The head of this organization draws a salary of $400k. Furthermore, this person is limited to 8 years in the job, and no more. You should have guesed by now that the organization in question is the U.S. Federal Government.
CEO compensation in this country has been inflated to obscene levels and accountability is at an all time low. There is no longer any recourse against a CEO who drives his company into Bankruptcy and ruins the lives of thousands of employees and investors. In the end, the board members and higher corporate officers still come out of the deal smelling like big buckets of money and the rank & file get screwed.
I don't have any answers to this dilema that aren't prohibited by the AUP so I'm done with this rant. Just don't try to justify exhorbitant CEO salaries to me by rationalizing that the individual is in charge of some large corporation. Very few corporations are actualy healthy enough to justify these salaries when their employees are denied reasonable benifts and compensation.
G

Cool Texan · 05-11-2005, 07:46 AM

Quote:

Damn right it's unfair after what he did to the employees of UAL! He asks the employees to sacrifice, actually doesn't even ask. He and the board of UAL took the cowards way out at the expense of alot of good working people.
This guy is really not much better than Ken Lay of Enron. It also sets a precedent for other companies to follow

So Jack, are you alright with what UAL did to their employees and the potential of what this kind of stuff is going to cost the American taxpayer?

Its easiest to judge from the sidelines.

:lurk:

05-11-2005, 08:16 AM

Thanks for caring Stew. Unless you have lived it and have had the Bernie's of the world take it all like some of us, most don't know jack about it, even though they think they do.

slowbuilder2005 · 05-11-2005, 08:29 AM

Keep an eye on this happening more and more in the future. As the baby boomers enter retirement and as medical costs continue to climb, there will be very serious pressure on the economy and it's going to hurt ...Ohhh to be Chinese just for a day!

Brian

Abalone · 05-11-2005, 08:47 AM

Quote

"I take the classification of GM and FORD as Junk investment very, very seriously.

I take it as a warning to equity investors in the United States and, in fact, to equity investors all over the world. "

I learned in Grade School that communism is a bad thing. I fought the communists in the Vietnam War.

Now American Corporations have discovered Communism is a good thing and they want to give those <people> my job because they work for free.

Stay tuned, things are just beginning to take shape.

Brace yourself....

Troutinator · 05-11-2005, 09:03 AM

Thumper,
Lots of good information. Thanks. I have a question for you though. You seem to think that the Pension Benefit Guaranty Corp. is some saving grace. I would ask you to look at

http://tinyurl.com/csgtj

and explain how a government entity that has operated with multi-BILLION dollar losses every year is a fallback? They lost 12 BILLION last year alone. If they are only paying out $.54 per dollar on average and losing this much... why would you have any confidence they are really a fall back?

Just curious. I keep hearing about the pension guaranties but it looks like all that happens is the scoundrels get to shift the burden to the taxpayers and the shaft to the pensioners.

TheRogue · 05-11-2005, 09:12 AM

Quote:

Do keep in mind that this is not a freebie for United or other airlines that may be forced to go this route. The government (the U.S. taxpayer) will pick up a potential long-term liability of $6 billion, but receives $1.5 billion in assets, mostly as United stock and convertible notes.

Pay $6 Billion, get $1.5 Billion in returns, and that's a good thing.?.?.?.?.?.?.Hey, that sounds like Enron accounting!!

Personally, I believe it's time for the "big" airlines to go belly-up. Pay off the blue collar employees what they're owed first, the investors second, and management with what's left.

There's plenty of "discount" airlines operating in the black currently, they'll step up and fill the void if the market is there.

Quote:

Tilton's $4.5 million pension was negotiated to be a fully funded, unbreakable package when he joined United in September 2002, which incidentally was just three months before the airline filed for Chapter 11.

So, a CEO has a "fully funded unbreakable package" but the blue-collar guy, who thought he had the same deal, does not? Reality sucks. :depressed: :depressed: :depressed:

TR

Thumper · 05-11-2005, 09:16 AM

Quote:

Just curious. I keep hearing about the pension guaranties but it looks like all that happens is the scoundrels get to shift the burden to the taxpayers and the shaft to the pensioners.

Though I question the use of the term "scoundrels", you are exactly correct. The PBGC, established under ERISA, resulted from several catastrophic pension plan failures back in the 1970s, and was viewed as a partial fail-safe for beneficiaries. It covers only defined benefit plans, not defined contribution plans, 401(k)s, etc. The government basically underwrites the bail-out and takes an equity/debt position in the defaulting corporation. If the funds run out, additional funds are appropriated.

In a sense the PBGC, as a taxpayer-funded fail-safe, is similar to the federally-financed flood insurance programs that have paid so dearly in the last few years. The difference is that nobody gets mad at God, but CEOs are relatively easy targets.

There are many, many similar government programs that are basically freebies for special interests. Just look at the myriad of agricultural subsidies, savings & loan guarantees and bailouts, Medicare/Medicaid payments for indigents, etc. The U.S. taxpayer foots the bill for all such programs, which cost hundreds of $billions annually. All are basically socialist in nature, but we as a nation have decided that the benefits are worth it.

TR --- The $1.5 billion in assets is presumably present-valued, while the $5 billion in potential liabilities is a downstream number. At least I hope so.

Troutinator · 05-11-2005, 09:23 AM

Quote:

Just curious. I keep hearing about the pension guaranties but it looks like all that happens is the scoundrels get to shift the burden to the taxpayers and the shaft to the pensioners.

In a sense the PBGC, as a taxpayer-funded fail-safe, is similar to the federally-financed flood insurance programs that have paid so dearly in the last few years. The difference is that nobody gets mad at God, but CEOs are relatively easy targets.

One difference. No one can control the rain. CEO's have ABSOLUTE control over the decision to raid pension funds when the company is going down. It is a conscious decision based on ethics and business practices. The same can't be said of a flood now can it?

backlash442 · 05-11-2005, 09:28 AM

"while significant, should be minimal" How's that for a contradiction of terms.

In my opinion once precedence has been established it will be easier for others to follow.

AuntyM · 05-11-2005, 09:30 AM

Quote:

In a sense the PBGC, as a taxpayer-funded fail-safe, is similar to the federally-financed flood insurance programs that have paid so dearly in the last few years. The difference is that nobody gets mad at God, but CEOs are relatively easy targets.

God never forced anyone to build a home in a flood plain, so why would anyone get mad at him?

Cloud-Nine · 05-11-2005, 09:33 AM

What about Basket ball players, other sport people, Movie actors, News anchors, and all the other thousands who make many times what the President makes. Why just pick on the CEO's?
Dick

GRUMPYR · 05-11-2005, 09:36 AM

Quote:

God never forced anyone to build a home in a flood plain, so why would anyone get mad at him?

Well, now that you mention it, didn't He make stupid people as well as smart people?
:grin:
Oh, if only Sam Kinniston were still with us,
"BECAUSE IT FLOODS THERE!!!!!!"

GRUMPYR · 05-11-2005, 09:44 AM

Quote:

What about Basket ball players, other sport people, Movie actors, News anchors, and all the other thousands who make many times what the President makes. Why just pick on the CEO's?
Dick

Because Lamar Q. Hoopster isn't responsible for the shafting of thousands of working stiffs. Although, now that you mention it, there is something obscene about paying professional sports players millions while we are paying Teachers, Police and Firefighters (people who perform genuinely usefull functions by the way) a tiny fraction of what they are really worth!
Our society is in serious need of an attitude adjustment!!

05-11-2005, 10:38 AM

Quote:

Thanks for caring Stew. Unless you have lived it and have had the Bernie's of the world take it all like some of us, most don't know jack about it, even though they think they do.

Absolutely I care ******! I kow you and other worked your (Po Po) off for years with the dream of a somewhat comfortable retirement waiting for you in your "golden" years. Then have to stand by while it get's pillaged and you end up with nothing.

As Cool Texan so flippantly remarks

Quote:

Its easiest to judge from the sidelines

That may be true but ask ****** about it since he was not on the sidelines when his pension got gutted

Cool Texan · 05-11-2005, 12:24 PM

Actually, I wasnt being flippant at all.

mandinga · 05-11-2005, 12:50 PM

Stew,
I am with you 110%...I don't care how rock solid the CEO's lawyer was when he set up his initial contract...bottom line is there are thousands of people losing their dreams of a comfortable retirement....all the while the guy at the top who is ultimately responsible for everyone in the company can walk away rich, fat and happy.

Try to keep in mind that it is only money, and money can only buy things that in the end are really worthless...when you die.
Good Luck Stew.

Orion · 05-11-2005, 12:55 PM

The issue of CEO compensation can be viewed from a variety of persepectives. The current CEO had qualifications that could earn him a seven figure income at a variety of companies. He chose to work for United for his own reasons one of which was compensation. We can assume that the Board of Directors had a certain amount of money to offer a new CEO and a deal was struck to hire the CEO. The CEO could have sold his services to another company for a similar amount of money. The company has to attract the best possible candidate that has some level of experience in running a large corporation. You don't get the kind of horsepower needed by offering the job at $10.00 per hour. If you want an experienced CEO you will have to provide a compensation package that is competetive enough to attract the talent away from another company. It's a supply and demand issue. Every new hire is a risk. Sometimes they work out, sometimes they don't If the current CEO had turned United around, his salary would have never been in question. The fact that he did not turn the company around does not make a case for a lower compensation package. It could however justify a search for a new CEO.

Orion

Cool Texan · 05-11-2005, 01:00 PM

Orion...

Abalone · 05-11-2005, 01:23 PM

The issue of Airline Pilots compensation can be viewed from a variety of persepectives. The current pilots had qualifications that could earn him a Pensios and income at a variety of companies. He chose to work for United for his own reasons one of which was compensation. We can assume that the Board of Directors had a certain amount of money to offer a new pilot and a deal was struck to hire the Pilot. The Pilot could have sold his services to another company for a similar amount of money. The company has to attract the best possible candidate that has some level of experience in running a large Airplane. You don't get the kind of horsepower needed by offering the job at $10.00 per hour. If you want an experienced Pilot you will have to provide a compensation package that is competetive enough to attract the talent away from another company. It's a supply and demand issue. Every new hire is a risk. Sometimes they work out, sometimes they don't If the current Pilot had turned United around, his salary would have never been in question. The fact that he did not turn the company around does not make a case for a lower compensation package. It could however justify a search for a new Pilots.

But United made a promise that they won't honor.

CEO's deserve a good wage and retirement and so does everybody else.

Orion · 05-11-2005, 01:57 PM

Abalone,
What a great post! It I could not have said it better myself. I would change only one word. I would suggest that the company "can't" honor their promise as opposed to "won't". Promises such as these are made based on the best information available at the time. No one could forsee the amount of financial harm to the airlines or other companies from the 9/11 attacks. No one could envision fuel prices rising as rapidly as they have. The negative impact of Terror on the world economy is much higher than anyone could imagine. The planet continues to shrink and a lot of work can be done overseas. The days of guaranteed jobs and ever increasing pay are over. I am not saying that it is right as much as I am saying that this is the new reality. The best we can all hope for is good health, and an opportunity to earn what we are worth at a job we enjoy.

mandinga · 05-11-2005, 02:21 PM

can't and won't are entirely different scenarios.

I wonder if they truly can't...

05-11-2005, 02:24 PM

I called HR (who if anyone believes Human Resources in a corporation is there to protect the employees, you are very naive).

They said whatever "cash" remained that was "frozen" in our previous pension fund, before the criminal elements took over, is in fact a guaranteed dollar-for-dollar face value amount, minus taxes. I hope they are at least telling the truth on that one. Only half of nothing to begin with would be yet another blow below the belt.

This "deserving" CEO was pulling down 450M+ A YEAR, plus stock and bonuses. CEO's should be paid on an hourly basis, pay as you go, pay for performance.

Part of his sentancing should be replacing every employees 401K fund, personally.

Now I am the one being naive.

With the upcoming "merger," after 24 years of contributions, just hoping to keep a job and health insurance at this point. I refuse to be a "Greeter" at WalMart. They are the current evil empire in the world. The American people don't have a clue either, how they are being sold out to China with nearly a 200 Billion dollar trade deficit and 80% imported junk in their stores, and put U.S. companies out of business, with all of the associated jobs as well. They have more money than Microsoft, IBM and a few others combined, with a couple Billion left over.

Scary little red "American" army.

mandinga · 05-11-2005, 02:33 PM

******

450M or 450K?

mandinga · 05-11-2005, 02:35 PM

Quote:

The American people don't have a clue either, how they are being sold out to China with nearly a 200 Billion dollar trade deficit :

the trade defecit to china is absurd and very scary.

garyk · 05-11-2005, 03:02 PM

As for executive compensation....

Don't get totally distracted by $600k/salary and contractually quaranteed retirement.

The question to ask is "what else" is he getting?

Deferred compensation plans are popular for highly compensated execs and, I'm informed, generally off the balance sheet.

So we have the pension for the most highly paid person in the organization contractually guaranteed, while the pensions of those needing retirement monies the most are at some risk - is this equitable? Is this fair and just?

mandinga · 05-11-2005, 03:09 PM

Quote:

So we have the pension for the most highly paid person in the organization contractually guaranteed, while the pensions of those needing retirement monies the most are at some risk - is this equitable? Is this fair and just?

fair and just...NO.

Regular workers don't have the financial backing nor justification to hire a high priced corporate lawyer to negotiate a compensation contract like most CEO's do prior to signing anything. A double edged sword.