PENSION CRASH LANDING
June 27, 2006
Delta Airlines has become the latest airline company to flip liabilities to the federal Pension Benefit Guaranty Corporation (PBGC), shifting costs to taxpayers, says the Wall Street Journal.
Since 2002, an increasing number of companies have dumped their pension plans on the PBGC, the quasi-government agency that "insures" private pension plans. The results:
- PBGC has gone from a $10 billion surplus in 2000 to more than a $23 billion deficit last year.
- It has become the financier of last resort for a private defined-benefit pension system that is underfunded by $450 billion.
The recent senate bill on airline pension relief exacerbates the situation, says the Journal:
- This giveaway would provide 20 years to amortize their underfunding -- in addition to the seven years everyone else is getting.
- Airlines would also be able to dodge a requirement that companies use an index of corporate bonds to discount their pension liabilities.
- In addition, airlines would get to choose their own discount rate.
Source: Editorial, "Pension Crash Landing," Wall Street Journal, June 27, 2006
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