The New York Times - August 20, 2004

United Pension Problems Spark Reform Calls
By THE ASSOCIATED PRESS

WASHINGTON (AP) -- The deficit at the government's cash-strapped pension insurance program could grow to about $15 billion if United Airlines dumps its four plans. The prospect prompted renewed calls for reform as well as election-year finger-pointing.

The Pension Benefit  Guaranty Corp. has filed an objection in bankruptcy court, saying United's action would put the agency at financial risk. Earlier this year, congressional investigators designated the agency as ``high risk,'' requiring urgent attention to operate effectively.

``It will be an absolute outrage if American taxpayers are stuck with a multibillion-dollar tab for another S&L-style bailout because of Washington's failure to adequately update pension laws,'' Rep. John Boehner, R-Ohio, chairman of the House Education and Workforce Committee, said Friday, noting that he has held more than a half dozen hearings on pension reform.

But the committee's top Democrat said Republicans were to blame for gridlock on reform.

``We should have begun our reform efforts at the first sign of this crisis over two years ago,'' said Rep. George Miller, D-Calif. ``Instead, we've just held hearings, which is no substitute for real action. I'm glad to hear that Chairman Boehner finally plans to move on pension reforms, but it shouldn't have taken United Airlines to convince him to do so.''

United's plans are underfunded by about $8.3 billion. If the company scraps the plans, the pension organization would have to pick up $6.4 billion in pension obligations, said agency spokesman Jeffrey Speicher. The agency had a $9.7 billion deficit as of March 31.

``PBGC believes the company has a legal obligation to continue to pay for those pension promises,'' Speicher said. However, the plans' participants, about 120,000 employees and retirees, still would lose $1.9 billion in retirement benefits.

Should United dump its plans, it would be the largest pension default, topping  Bethlehem Steel's $3.6 billion in underfunding in 2002. This spring, the agency assumed control of US Airways pilots' pension plan, which was underfunded by about $2.5 billion.

The agency was created in 1974 to guarantee payment of benefits earned in traditional pension plans, which are offered by employers and promise workers a set benefit based on salary and years of service. Workers are not required to make contributions as they do to 401(k) plans.

Current law allows private companies to avoid making minimum contributions to their plans for years, a provision the agency and some in Congress want changed.

Boehner said that, in his committee's hearings, ``just this kind of development was predicted, and we're now beginning to see the consequences of the failure to reform and modernize these laws.''

Miller fired back, saying he's been pushing for changes for two years. ``As the nation's pension crisis has worsened, President Bush and Republican leaders in Congress have been asleep at the switch,'' he said. ``For them to now turn around and claim that they have been on top of this issue is utterly disingenuous.''