hscottm
Jan 22, 03, 10:06 pm
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Not good news...
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Senate Refuses to Ease US Airways Pension Liability
Wednesday January 22, 7:52 pm ET
By John Godfrey
WASHINGTON -- The Senate on Wednesday rejected legislation intended to give financially strapped US Airways Group Inc. an extra 25 years to fund its accrued pension liabilities.
The provision, offered as an amendment to a $385 billion omnibus spending bill, failed on a 64-31 vote.
"Time is of the essence," Republican Sen. Arlen Specter said, explaining why he was trying to attach the provision to the bill Wednesday. US Airways declared bankruptcy in August and must complete a reorganization in March.
Sen. Rick Santorum (R., Pa.), and Sen. George Allen (R., Va.), joined Sen. Specter in offering the amendment. US Airways has corporate headquarters in Arlington, Va., but two of its three hubs are in Pennsylvania.
The airline has been trying to secure a $1 billion loan from the Air Transportation Stabilization Board. The ATSB, however, is requiring the airline to develop a viable business plan for the next seven years, a hurdle US Airways cannot surmount given its sizable pension liabilities.
Companies have a limited amount of time to meet minimum funding requirements should a defined benefit plan become underfunded. Because of this rule, poor market performance and a 41-year low in interest rates leave the airlines facing $575 million in payments to its pilot pension plan in 2004 alone, Sen. Specter said.
The solution US Airways is proposing is to shut down its pilot pension fund and start it anew. The new pension plan would have a longer period in which to meet minimum funding requirements.
"Simply put, payments that would have been made over a 5-year period would be spread out over 30 years," Sen. Specter said in explaining the bill.
The Pension Benefit Guarantee Corporation, a federal agency, however, has said it has no authority to approve such a plan. Sen. Specter calls that " bureaucratic intransigence".
More to the point, if the company is allowed to go under, PBGC will be stuck with the cost of making good on US Airways' pension plan.
"The PBGC Would be no worse off than if US Airways failed," Sen. Specter said.
Senate Finance Committee Chairman Charles E. Grassley, (R., Iowa), opposes the legislation, arguing that it would "create as a matter of substance perverse disincentives for all plans that paid premiums the PBGC" by singling out one corporation to exempt from pension funding rules.
Finance Committee ranking Democrat Sen. Max Baucus, of Montana, said the plan has "serious deficiencies" in that it applies to only one airline.
"It's unfair to other airlines," Sen. Baucus said. "We should have more time to determine the right way to treat all airlines."
Not good news...
---
Senate Refuses to Ease US Airways Pension Liability
Wednesday January 22, 7:52 pm ET
By John Godfrey
WASHINGTON -- The Senate on Wednesday rejected legislation intended to give financially strapped US Airways Group Inc. an extra 25 years to fund its accrued pension liabilities.
The provision, offered as an amendment to a $385 billion omnibus spending bill, failed on a 64-31 vote.
"Time is of the essence," Republican Sen. Arlen Specter said, explaining why he was trying to attach the provision to the bill Wednesday. US Airways declared bankruptcy in August and must complete a reorganization in March.
Sen. Rick Santorum (R., Pa.), and Sen. George Allen (R., Va.), joined Sen. Specter in offering the amendment. US Airways has corporate headquarters in Arlington, Va., but two of its three hubs are in Pennsylvania.
The airline has been trying to secure a $1 billion loan from the Air Transportation Stabilization Board. The ATSB, however, is requiring the airline to develop a viable business plan for the next seven years, a hurdle US Airways cannot surmount given its sizable pension liabilities.
Companies have a limited amount of time to meet minimum funding requirements should a defined benefit plan become underfunded. Because of this rule, poor market performance and a 41-year low in interest rates leave the airlines facing $575 million in payments to its pilot pension plan in 2004 alone, Sen. Specter said.
The solution US Airways is proposing is to shut down its pilot pension fund and start it anew. The new pension plan would have a longer period in which to meet minimum funding requirements.
"Simply put, payments that would have been made over a 5-year period would be spread out over 30 years," Sen. Specter said in explaining the bill.
The Pension Benefit Guarantee Corporation, a federal agency, however, has said it has no authority to approve such a plan. Sen. Specter calls that " bureaucratic intransigence".
More to the point, if the company is allowed to go under, PBGC will be stuck with the cost of making good on US Airways' pension plan.
"The PBGC Would be no worse off than if US Airways failed," Sen. Specter said.
Senate Finance Committee Chairman Charles E. Grassley, (R., Iowa), opposes the legislation, arguing that it would "create as a matter of substance perverse disincentives for all plans that paid premiums the PBGC" by singling out one corporation to exempt from pension funding rules.
Finance Committee ranking Democrat Sen. Max Baucus, of Montana, said the plan has "serious deficiencies" in that it applies to only one airline.
"It's unfair to other airlines," Sen. Baucus said. "We should have more time to determine the right way to treat all airlines."