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July 17, 2003
Airlines, Unions Seek Break From Pension Rules

The airline industry and its unions are pressing for a special break from federal pension-funding rules, even as Congress debates reform of the rules, according to the Washington Post.

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Under a measure sponsored by Rep. Dave Camp, R-Mich., underfunded airline pensions could defer for five years the large cash payments they'd otherwise have to make now. They could also put off repayment of funding deficits for as long as 20 years, the Post reports.

The exception is aimed at reviving the pension plan of about 7,000 US Airways pilots, which was taken over by the federal Pension Benefit Guaranty Corp. this year, after the airline went into bankruptcy. Once revived, proponents of the meanure hope, the pension plan would return to the airline, which in turn would have the effect of restoring the pilots' full pensions.

Those pensions were were limited, in some cases severely, by the PBGC.

Treasury and PBGC officials told the Post that they oppose any legislation, including the Camp bill, that singles out specific industries for special treatment.

"We're very concerned about it," PBGC executive director Steven A. Kandarian said in an interview with the newspaper. "If you give companies two decades to make up the shortfall caused by skipping their required pension contributions, the risk is that some of those plans will terminate and transfer their liabilities to the PBGC. The result would be higher premiums on financially healthy companies with better-funded pension plans. One sure way to discourage companies from offering pensions is to make them pay for the unfunded promises of others."

But Duane E. Woerth, president of the Air Line Pilots Association, the union spearheading the drive for the legislation, countered that his industry suffered unique damage in the Sept. 11, 2001, terrorist attacks. Yet, he added, it can be expected to recover, unlike some debt-laden companies that face large pension-funding problems.

He said that if the airline pension plans could be salvaged that would reduce further damage to the PBGC, which is facing a record funding shortfall after the collapse of the U.S. steel industry. "This is the best way to prevent the worst-case scenario," Woerth said, adding that Congress must deal with the issue in a "timely manner," or risk widespread financial damage to many other retirees.


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