Is another S&L crisis headed our way? Will we be faced with another $490 billion bailout, or something in the neighborhood of a $1 trillion bailout? This time, it is not exactly about savings and loans, but the plight of the airline industry, other corporations and their pension plans. Currently, the government is trying to resolve the issue of pensions and private corporations, but will it be help that appears too little and too late? The under funding of corporate pensions combined with the disappointing performance of equities over the past few years signals a domino effect of shortfalls of many American corporations. Baby Boomers who are soon scheduled to retire, will suddenly realize that the asset levels of their plans are not sufficient to retire on. The Pension Benefit Guaranty Corp., a federal agency that insures private pension plans, already has a $23.3 billion deficit because of defaults. This makes it very difficult for many of the largest corporate pension plans to survive economic hardship. Actually, more than a hundred of the largest plans have less than their promised benefits on deposit. Thus, there is no true safety net in sight. The expectation of many employees receiving payments from their employers has become nothing more than dismal. At one time it was 100 percent expectation, but now, many are haunted with speculation.
The nation can be considered on what may be deemed a collision course with an economic disaster of un-fathomable proportions. The latest ruling that was just handed down in the judicial system, came from a federal judge who allowed United Airlines to default on $9 billion in pension obligations. UAL has been trying to emerge from bankruptcy for some time, but is this a justified answer? Employees, who have worked all of their lives, may now have less than half the amount of money they once had in their pension fund. Their monthly payments will inevitably be less than what was expected of their pensions over the years. UAL has more than 120,000 employees, and possibly 2/3 may be covered and afforded full benefits. On the other hand, there are others that may receive close to nothing. Much of UAL and the short fall in pension funds come from corporate deception. So, many corporations that found themselves partaking in corporate deception, may eventually end up facing criminal charges. Enron and MCI, were just examples of how criminal activity can stem from such pensionfunding practices. The simple solution for companies seems to be bankruptcy. The laws have changed for individuals thus creating a very unforgiving option. If you were to try to file for bankruptcy in the next four months, all of your debts are no longer extinguished; especially if you made purchases within the last six months before you filed.
On the other hand, corporations who have a much larger responsibility than an individual, can file bankruptcy at any time, dodge the pension issue entirely; let the CEOs leave with platinum parachutes of million dollar proportions, and the employee and eventually the general tax paying public are left holding the bag. Major corporations such as GM, Ford, Maytag, AT&T, IBM and a host of others are confidentially discussing such options behind closed doors. The question may soon be presented to the public as to how close these companies are to making such a drastic decision to file bankruptcy so they can escape the pension liability. GM had just announced on June 7, 2005 that they will be laying off 25,000 people and closing a number of plants within the next three and a half years. This is the largest layoff announcement in the past two years. The under funding of corporate pensions combined with the disappointing performance of equities over the past few years may be placing employees of American corporations on a path to face hard times. Baby Boomers in American corporations, are faced with a mass retirement exodus. Many who refuse to recognize this problem will suddenly find that the asset levels of their corporate pension plans are not sufficient to service the promises corporations made to retirees.