Help for UAL Pension Plan
Updated from 2:01 p.m. EST
The U.S. government's pension insurer is moving to take over pensions of ground employees at
UAL's
(UALAQ)
United Airlines
.
The Pension Benefit Guaranty Corp. has filed a motion in U.S. District Court in Alexandria, Va., to take over defined-benefit retirement plans for more than 36,000 active and retired employees at the airline, which is under Chapter 11 bankruptcy protection.
"United's pension plan for its ground employees is only 30% funded, the company has missed $363 million in legally required contributions, and management has repeatedly stated its intention to terminate the plan," said Bradley Belt, the PBGC's executive director. "This action was necessary at this time to protect the pension insurance fund against further losses."
According to the PBGC, the ground employees' plans have only $1.2 billion in assets to cover $4.1 billion in benefit obligations. Of that $2.9 billion shortfall, the PBGC will guarantee an estimated $2.1 billion in benefits.
The PBGC said the plan will be terminated as of Friday.
United said it's studying the PBGC's action. "While we believe it is best to resolve our pension issues at the bargaining table, we continue to believe that termination and replacement of all our defined benefit pension plans is necessary," said spokeswoman Jean Medina in a statement. "We will continue to work in good faith with our unions to resolve both our need for long-term cost savings and our pension issues."
The International Association of Machinists and Aerospace Workers, which represents most of United's ground employees, continues to oppose termination of the pension plan. The union said it plans to hold a meeting Monday with the PBGC and United to discuss its plan to save its members' pensions. "Failure by United to reach an agreement with IAM could lead to strike action against the carrier," the union said.
Last December, the PBGC filed to take over United's pilot pension plan immediately. But that move is tied up in court, because it conflicted with an agreement between United and its pilots under which the plan would not be terminated until May.
Although it is a federal corporation, the PBGC receives no tax revenue. Instead, it functions like an insurance company, receiving premiums from companies with defined-benefit pension plans.
UAL shares were up 1 cent, or 1.0%, at $1.02.