A Stitch in Haste

Another one bites the dust:

The U.S. pension agency on Thursday said it had filed a motion in court asking for permission to take over the retirement plans of pilots at bankrupt United Airlines, which are underfunded by $2.9 billion.

The Pension Benefit Guaranty Corp., which insures traditional retirement plans, said its motion, filed in U.S. District Court for the Northern District of Illinois, likely would make the agency liable for about $1.4 billion in guaranteed benefits. That would be the third-largest claim in the history of the agency's program.
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Elk Grove Village, Illinois-based United last month asked a bankruptcy court judge to allow it to terminate labor agreements and pension plans to cut costs and attract the financing it needs to exit bankruptcy.
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The PBGC said that by taking over the pilots plan now, it is protecting itself against the possibility of up to $140 million in additional losses. The agency currently operates at a $23 billion deficit.
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With the termination of the United pilots' plan, five of the 10 largest claims in PBGC's history would be from airlines, the PBGC said. Overall, the airline industry accounts for nearly 20 percent of total claims for the agency.

I have blogged previously about how the growing crisis in private defined-benefit pensions, especially those of the airlines, demonstrates in microcosm how the Social Security crisis will play itself out if reform does not materialize. Supposedly "guaranteed" benefits accumulate faster than contributions can pay them, the government steps in with a buffer program (a.k.a. a phantom "trust fund"), then the government's program itself faces a crisis that can only be solved with general revenues (i.e., higher taxes). The parallels to Social Security are self-apparent, yet are, for the most part, being totally ignored, even by advocates of reform.

How unfortunate. We should be using every possible tool, example and anecdote to catalyze the debate.

Related Posts:
PBGC Continues to Foreshadow the Social Security Crisis
Slouching Towards "Air Amtrak"
The Social Security Meta-Crisis