Workers wonder whether pension will be there at retirement

In troubled industries, companies dump billions in obligations on agency

June 10, 2005|By Paul Adams and Meredith Cohn | Paul Adams and Meredith Cohn,SUN STAFF

Doug Hanscom, a former assembler at the now-closed General Motors Corp. plant in Southeast Baltimore, is one of the hundreds of thousands of blue-collar workers in the United States who fear their pensions will be gone by the time they retire.

Industry analysts say the troubled automaker is at risk of joining a long list of steel makers, airlines and others that have filed for bankruptcy protection as a precursor to dumping their pension plans, leaving workers to collect a fraction of what they were promised in retirement.

"I'll probably have to get two jobs just to cover what my pension would have covered," said Hanscom, a 28-year veteran of GM who made $27 an hour. "It's a very depressing scenario."

Hanscom and scores of autoworkers, airline pilots, machinists and steelworkers are watching anxiously as Congress and the Bush administration debate legislation that would shore up the nation's increasingly under-funded private pension system.

Many fear that reforms will be too little or come too late, forcing people to keep working well past retirement or face a sharp decline in their quality of life.

The growing number of failing companies has saddled the Pension Benefit Guaranty Corp., the quasi-government agency that backs private pension plans, with a deficit that could hit $71 billion in the next decade. PBGC officials told lawmakers this week that companies with underfunded pension plans reported a record shortfall of $354 billion in their latest filings.

"I'm 53 years old, so my chances of starting over again - who's going to hire somebody my age?" Hanscom said.

The growing desperation of workers is mirrored in the PBGC's financial woes, which have ballooned in the past five years as some of the nation's biggest industries have been devastated by global competition, a spotty economy - and by their large pools of retirees collecting pensions.

The steel industry was the first to go, with the former Bethlehem Steel and a handful of other major steel producers turning their pensions over to the PBGC, which pays a fraction of what those workers were due.

Airlines followed. US Airways Group Inc. and UAL Corp.'s United Airlines each dumped its pensions after losing billions of dollars in the past five years.

The auto industry could be next. Four auto parts makers recently filed for Chapter 11 bankruptcy protection. Some fear GM's troubles could eventually lead it down the same path.

A PBGC spokesman said some airline and steel companies remain vulnerable. And companies in the automotive sector have pension plans that are collectively under-funded by $55 billion to $60 billion.

Without some sort of bailout for the system, many workers worry that the PBGC won't be able to keep up.

"We're all anxious," said John Cirri, president of the United Steelworkers of America Local 9477, which represents workers at the Sparrows Point steel mill in Baltimore County.

The former Bethlehem Steel mill there was sold to International Steel Group Inc., which also acquired the assets of LTV Corp., Georgetown Steel Co. and Acme Steel Co. - minus those companies' billions of dollars in pension and benefit obligations. In October, ISG agreed to sell out to Netherlands-based Mittal Steel Co. for about $4.5 billion, creating the world's largest steel maker.

Cirri, who will be 50 in September, was one year from getting his 30-year retirement when Beth Steel canceled its pension plan. Now he hopes a new pension plan with Mittal will help make up for what he lost.

"It's worry over whether the money is going to be there, and we're all still hoping for some kind of pension reform," he said.

When Kit Darby looks back, he fills with both pride - and relief - that he is a military veteran. The military benefits the 58-year-old Chicago-based pilot will receive when he retires in two years will help reduce the sting of the diminished pension check he'll get each month from his bankrupt employer.

The airline Darby works for has cut his pay and is no longer responsible for all of the retirement money he was promised.

"I will get $2,500 a month more because I chose to give up my weekends and summers for 23 years in the Reserves," said Darby, who is also president and publisher of AIR Inc., a pilot career information service.

Some pilots at major airlines, which together have lost billions in recent years, say they should be allowed to fly past the mandatory retirement age of 60 so they could earn paychecks and pay into pension systems longer.

And, they say, federal rules should be loosened to allow companies to contribute what they can afford to their pension plans, rather than handing the entire obligation to the PBGC.

Another idea would be to let companies take longer to pay back money they owe to their pension systems - something that is strictly regulated now.

Another proposal would be to provide companies options other than bankruptcy, which allows them to dump their pension obligations onto the PBGC.

Joseph Tiberi is spokesman for the International Association of Machinists and Aerospace Workers, which represents more than 100,000 workers at six airlines, including two that are under bankruptcy protection. He said the union is lobbying Congress to ban pension terminations for six months so lawmakers can craft a solution.

"They need to fix this," he said. "When you make a decision to retire, you make it based on your expected income."

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