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Senate committee OKs pension legislation
Tuesday July 26, 3:01 pm ET
The Senate Finance Committee unanimously approved Tuesday broad pension legislation to give airlines new options for funding their pension plans and avoiding bankruptcy.
The plan includes a provision for airlines that would let them spread their pension plan payments over 14 years plus a seven-year transition period instead of the current four years.
U.S. Sen. Johnny Isakson (R-Ga.), who introduced bipartisan legislation in April to address the airline pension crisis, said the committee's vote was a good beginning.
"Airline employees deserve to have their earned pensions protected, and the legislation approved today by the Senate Finance Committee does not go as far as I would like but it is good start," Isakson said. "I will continue working with my colleagues to ensure the interests of the airline employees and the American taxpayers are protected."
Atlanta-based Delta Air Lines Inc. (NYSE: DAL - News) and other carriers are struggling to meet required pension payments and are considering eliminating their pension plans altogether or filing for bankruptcy, which would dissolve their pension plans. Delta's pensions are currently underfunded by about $5 billion, and the company must make $450 million in catch-up payments this year. Those payments would balloon to $800 million and $900 million in the next few years without some legislative change, figures Delta officials have said are simply impossible for them to afford. On June 21, Delta reported it took a $96 million net charge associated with pension and related items in the second quarter.
In April, Isakson and Sen. John D. Rockefeller IV (D-W. Va.) introduced the "Employee Pension Preservation Act of 2005," which would allow airlines to spread their pension plan funding over a more manageable schedule of 25 years -- instead of four years -- and under more stable, long-range terms. Before an airline can use one of the options in the bill, it must have an affirmative vote of its union employees.
The bill also protects taxpayers by limiting the liability of the Pension Benefit Guarantee Corp., which likely would have to borrow from the U.S. Treasury to meet its obligation to pay airline pensions if one or more carriers declared bankruptcy.
"The [Pension Benefit Guarantee Corp.] can't sustain many more hits to its bottom line, and the potential for a taxpayer-funded bailout is growing every day we do nothing," said Senate Finance Chairman Charles Grassley (R-Iowa).
Isakson's bill has the support of airline employees, their collective bargaining organizations and their employers. U.S. Rep. Tom Price (R-Ga.) has introduced an identical bill in the House of Representatives.
Published July 26, 2005 by the Atlanta Business Chronicle
Senate committee OKs pension legislation
Tuesday July 26, 3:01 pm ET
The Senate Finance Committee unanimously approved Tuesday broad pension legislation to give airlines new options for funding their pension plans and avoiding bankruptcy.
The plan includes a provision for airlines that would let them spread their pension plan payments over 14 years plus a seven-year transition period instead of the current four years.
U.S. Sen. Johnny Isakson (R-Ga.), who introduced bipartisan legislation in April to address the airline pension crisis, said the committee's vote was a good beginning.
"Airline employees deserve to have their earned pensions protected, and the legislation approved today by the Senate Finance Committee does not go as far as I would like but it is good start," Isakson said. "I will continue working with my colleagues to ensure the interests of the airline employees and the American taxpayers are protected."
Atlanta-based Delta Air Lines Inc. (NYSE: DAL - News) and other carriers are struggling to meet required pension payments and are considering eliminating their pension plans altogether or filing for bankruptcy, which would dissolve their pension plans. Delta's pensions are currently underfunded by about $5 billion, and the company must make $450 million in catch-up payments this year. Those payments would balloon to $800 million and $900 million in the next few years without some legislative change, figures Delta officials have said are simply impossible for them to afford. On June 21, Delta reported it took a $96 million net charge associated with pension and related items in the second quarter.
In April, Isakson and Sen. John D. Rockefeller IV (D-W. Va.) introduced the "Employee Pension Preservation Act of 2005," which would allow airlines to spread their pension plan funding over a more manageable schedule of 25 years -- instead of four years -- and under more stable, long-range terms. Before an airline can use one of the options in the bill, it must have an affirmative vote of its union employees.
The bill also protects taxpayers by limiting the liability of the Pension Benefit Guarantee Corp., which likely would have to borrow from the U.S. Treasury to meet its obligation to pay airline pensions if one or more carriers declared bankruptcy.
"The [Pension Benefit Guarantee Corp.] can't sustain many more hits to its bottom line, and the potential for a taxpayer-funded bailout is growing every day we do nothing," said Senate Finance Chairman Charles Grassley (R-Iowa).
Isakson's bill has the support of airline employees, their collective bargaining organizations and their employers. U.S. Rep. Tom Price (R-Ga.) has introduced an identical bill in the House of Representatives.
Published July 26, 2005 by the Atlanta Business Chronicle
