A bill that would allow airlines with severely underfunded pension plans to
defer much of their cash contributions for two years cleared the U.S. House
of Representatives on Thursday.
The bill would let the airlines, which continue to grapple with steep downtowns,
to defer 80 percent of the cash contributions they would otherwise be required
to make to bring their plans up to full funding, according to the Washington
The legislation next heads to the Senate, where its fate remains uncertain.
The Post reports that two Senate committees have approved pension bills, but
the measures differ and the panels have been in negotiations to try to agree
on a single version.
Several major airlines have been struggling to fund their pensions:
- United Airlines, the nation's second-largest carrier, last month asked the
Internal Revenue Service for approval to stretch out its payments to its underfunded
- US Airways' pilots' pension was taken over this year by the Pension Benefit
Guaranty Corp. after the carrier terminated the plan.
- Northwest Airlines was granted a waiver last November by the IRS for its
2003 plan, which allowed the carrier to extend its payments over five years
instead of 18 months.
The Post observes that the House bill could ultimately come back to bite taxpayers
if it is widely granted and companies like United don't return to economic health.
The PBGC guarantees that it will pay pension benefits up to certain limits on
plans that fail. Allowing companies to put off contributions to their plans
could make that payoff much more costly for the agency if the plans simply sink
deeper into the hole.
The PBGC itself is currently in deficit, and while it has assets to pay benefits
for years, a series of large failures could force it to seek a taxpayer bailout
of its own, experts said.