Pension points
Toolbox
Published: June 14, 2005
While President Bush continues to push his privatization plan for Social Security — despite repeated poll results that show widespread public opposition — many Americans are taking it on the chin (and in the wallet) in another aspect of retirement. Don't expect this billion dollar boondoggle to cause any discomfort in Washington's big-corporate mindset, though.
We're talking about pensions and pension rights, independent of Social Security. Actually we're talking about egregious injustice, as when the chief executive officers of financially failing companies are handed extremely generous pension rights, while their own employees are handed a stiffing, many left to wonder if they'll have any pension at all.
The best-known of these situations is the one involving United Airlines. A federal bankruptcy judge has allowed the airline to shed $3.2 billion in pension costs in its bid to stay alive as a corporation. The law may in fact justify the judge's ruling, although the airline's 121,000 current and former employees who stand to lose their pensions may find that small comfort.
Pity not United's CEO, Glenn Tilton, however. That's because his company's board of directors awarded him what amounts to a $4.5 million pension that cannot be diminished by the company's performance. To him, it's money in the bank.
Typically, corporate pension funds would remain a corporate asset and therefore subject to seizure by creditors. Shifting the money to bankruptcy-proof trusts would almost certainly result in larger tax liabilities for Delta's top executives, so the airline simply awarded them more money to compensate for the higher taxes. It's a neat gimmick and perfectly legal. Morality issues don't enter into the equation as far as the court is concerned.
Delta Airlines, which is in the same dire financial straits as United, recently awarded its chief executive, Leo Mullin, a $4.5 million pension too. Earlier, US Airways sought bankruptcy protection from the courts but took care to first hand its CEO, Stephen Wolf, $15 million. Why should he have to suffer the way the airline's pilots, attendants, ground crews and mechanics will suffer? Again, that's not a matter for the courts.
On Monday, the Washington Post put a face other than a fat-cat CEO on the airline pension controversy. It described the plight of Ellen Saracini, who lost her husband, United Airlines Capt. Victor J. Saracini, when his Flight 175 crashed into the World Trade Center on Sept. 11, 2001. She now faces the probable loss of more than half of her widow's pension because United is defaulting on its $9 billion in pension obligations. The default is the largest ever in the United States. Saracini told the newspaper about the default's impact on her and her two daughters, explaining that she hopes her story will draw attention to the laws and policies that allow such travesties to occur.
"My own situation is not a crisis — I have my husband's life insurance to keep us secure in our house," she said. "But a lot of other people have real hardship – medical costs they won't be able to afford, houses they won't be able to keep. If I can help draw attention to them, I'll do it in a heartbeat."
But it shouldn't be up to Ellen Saracini and others like her to focus the nation's attention on this egregious and dismal situation. Where are America's politicians on this issue? Instead of pushing an unwanted Social Security scheme, why isn't the president himself leading the fight to correct the obvious inequities in the law that allow failed executives to land safely – thanks to so-called golden parachutes – when their employees are left to fend for themselves? And what about all that fulsome Bush prattle about easing Americans' tax bite? Guess who gets to pick up some of the failed pension funds' tab: That's right, you the taxpayer.
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