Tuesday, October 11, 2005

The fate of Delta's and Delphi's pensions and ultimately Social Security if no action is taken

Do you remember that United Airlines recently shifted its pension obligations to the Pension Benefit Guaranty Corporation (PBGC)? (see: 'Tremors before the Earthquake')

Looks like workers of two more companies, Delta Airlines and Delphi Automotive, that recently filed for bankruptcy may soon may suffer the same fate:

Cincinnati Enquirer:

Delta Air Lines will default on its pension plan as part of its bankruptcy reorganization if it doesn't get the relief it has been seeking from Congress this fall, according to the company's top Washington lobbyist...

...If Delta were to default, that action would affect 28,000 retirees directly by possibly reducing monthly stipends.

A default also would require the Pension Benefit Guaranty Corp. (PBGC) - the nonprofit entity that insures such pension plans - to pick up Delta's plan, which is underfunded by $10.6 billion.

Delta has already said it does not intend to make its next scheduled required payment by the end of the year.
Detroit Free Press:

Delphi Corp. has warned its retired hourly employees that their pensions could be at risk if the company files for bankruptcy.

A letter sent to Delphi's 12,000 hourly retirees at the end of last week explains what will happen to their pension benefits if the company files for bankruptcy, The Oakland Press of Pontiac reported Thursday.

According to the letter, responsibility for the company's pension would be transferred to the federal Pension Benefit Guarantee Corp. and the maximum benefit for anyone retiring before the age of 65 would drop to $1,710 per month.
As Michael Barone argues in 'Future Shock', we're seeing the precursors of a larger collapse with another defined-benefit retirement system...Social Security.


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