US - The Pension Benefit Guaranty Corporation (PBGC) has said that it has reached a settlement with United Airlines over the termination of the company's $9.8bn underfunded pension plans.
Under the terms of the agreement, which must still be approved by the bankruptcy court overseeing UAL's restructuring, the PBGC will terminate and become trustee of the company's four pension plans and the agency's claims against the company would be settled.
The PBGC and its financial advisers believe the settlement is superior to the recovery the agency would have received as an unsecured creditor in bankruptcy, PBGC said in a statement.
PBGC executive director Bradley Belt said: “We believe that this agreement, under the circumstances, is in the best interests of the pension insurance program and its stakeholders.
The PBGC has an obligation to reduce its losses for the protection of workers and retirees, other companies that pay insurance premiums, and taxpayers. By reaching a settlement now, we further that goal.
Collectively, United's pension plans are underfunded by $9.8bn on a termination basis, $6.6bn of which is guaranteed, according to the PBGC.
The four plans are: the UA Pilot Defined Benefit Plan, which covers 14,100 participants and has $2.8bn in assets to pay $5.7bn in promised benefits; the United Airlines Ground Employees Retirement Plan, which covers 36,100 participants and has $1.3bn in assets to pay $4bn in promised benefits; the UA Flight Attendant Defined Benefit Pension Plan, which covers 28,600 participants and has $1.4bn in assets to pay $3.3bn in promised benefits; and the Management, Administrative and Public Contact Defined Benefit Pension Plan, which covers 42,700 participants and has $1.5bn in assets to pay $3.8bn in promised benefits.
Belt added: This again highlights the need for the comprehensive pension reform. Unless and until Congress fixes the rules that allow pension plans to become so underfunded, the insurance program and plan participants are at risk of suffering large financial losses.”
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