PBGC to File Objection to UAL Agreement Blocking Pension Payments
FOR IMMEDIATE RELEASE
August 13, 2004
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) will file an objection in bankruptcy court today to provisions in UAL Corporation's debtor-in-possession financing agreement that purport to prohibit the company from making required contributions to its pension plans. The PBGC will also file updated claims totaling $8.3 billion on behalf of pension plan participants in UAL's four defined-benefit pension plans.
"United's decision to stop funding its pension plans increases the risk of loss not only to the company's workers and retirees but to participants in other plans insured by the PBGC," said Executive Director Bradley Belt. "The bankruptcy court should reject this attempt to sidestep the statutory funding rules. Agreements between private parties must not take precedence over federal pension law."
The Employee Retirement Income Security Act (ERISA) requires UAL to continue funding its pension plans unless the plans are terminated or the IRS grants a waiver of the minimum funding requirements. The debtor-in-possession financing agreement submitted by UAL purports to prohibit the company from making those required contributions. In its filing, the PBGC will ask the judge to modify the agreement to comply with ERISA.
United sponsors four pension plans covering almost 119,000 workers and retirees. Of the $8.3 billion in underfunding, the PBGC estimates that it would be liable for $6.4 billion if all four plans terminated. The $1.9 billion difference represents the benefits that United's workers and retirees would lose because they exceed the guarantee limits set by Congress.
The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 31,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.
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PBGC No. 04-64