For generations, American workers and American companies kept a pact: hard labor in return for dependable pay. Most of that salary came immediately, in the form of weekly paychecks that kept families together and bill collectors away.
But a small and essential part was set aside, held back and invested by employers and returned later in the form of pensions. Workers waited for the money so they could ensure a solid standard of living as they moved into old age.
Now, for more and more workers, that pact has been breached.
Struggling United Airlines, with court approval, backed out of its commitment to more than 35,000 retired workers and nearly 60,000 employees, shifting the burden to the federal Pension Benefit Guaranty Corp., which funds payments from insurance premiums paid by companies with pension plans.
For many United retirees, the shift means drastic cuts to the benefits they counted on – for some, as much as 80 percent.
Plans crushed. Lives rearranged.
And it’s not just them.
What happened so brutally at United is happening across the country.
Troubled companies – airlines, steel manufacturers and others – make their cases clear: Shifting economies have pushed them near extinction. They can’t emerge from debt and keep current workers employed, they say, unless their pension obligations are lifted. Others say they can’t recover from a volatile stock market, which has left plans underfunded.
For retirees, there is little recourse, but there is some relief.
When a company’s pension plan is underfunded and then terminated, the PBGC takes over. Many workers find their benefits restored – up to $45,613 annually, for example, for someone who retires at 65. But the PBGC’s formula for compensation penalizes some who retired before age 65. That includes large numbers of workers from struggling companies who were offered generous early-retirement packages to lighten company payrolls.
And even that money is threatened. The PBGC is hammered by a deficit of its own: more than $20 billion. The agency is pushing for pension reform. Caught between bankrupt corporations and a nearly bankrupt government insurer are millions of middle-class workers – ordinary people with mortgages, medical bills and children to put through college.
For them, there is little good news.
