The Canary is Dead

by on May 11, 2005 at 7:12 am in Economics | Permalink

United Airlines, which is operating in bankruptcy protection, received
court permission yesterday to terminate its four employee pension
plans…The federal agency that guarantees pensions, the Pension Benefit  Guaranty Corporation,  will assume responsibility for the plans, which cover about 134,000 workers.

Some
retirees could see sharply lower pension payments as a result; others
will see little change in benefits, depending on a variety of factors.
Some retirees at US Airways, which has terminated its plans, have seen
benefits drop by as much as 50 percent….United plans to switch its current employees from traditional
retirement programs, which are called defined-benefit plans, to
defined-contribution plans like 401(k) programs

Now, let’s review.  A large organization counts on its younger workers and continuing high revenues to fund the pensions and medical care of its retired workers but finds that rising health care costs, longer life-expectancy, and its own inability to control spending force it to cut pension benefits and switch to personal accounts.

Kinda makes you go hmmm…doesn’t it?

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