United Airlines Defaults on Pension Plan

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United Airlines Defaults on Pension Plan

Friday, May 13th, 2005 | Social Security |

United Airlines, already bankrupt, has terminated its employee pension plans. Control of the plans has been passed to a Federal corporation by order of the courts. Employees may see as much as 50% of their expected retirement funds disappearing.

Alex Tabarrok writes:

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.

Yep. I expect Social Security will be saved in large part because it’s quite modest, but this won’t be the first pension plan - corporate or governmental - to go bust. Ford and especially GM could default on their pension plans. Most European countries can’t possibly honor their pension systems. The results could be devastating, not only for the retirees, but for the health of the nations involved.

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