Prometheus 6

The only way for airlines to dump their pensions and not pay a price, is to go into bankruptcy and then get the plan approved. Otherwise, they can dump their pensions by going to some other type of plan, but that would be expensive.

The airline should have been declared insolvent. The pension would have been lost anyway.

The economic waves are going to be "interesting". Bonds took a dive because people took money out of stocks into the "safe" area of bonds.

Between the pension thing and the base closing thing I feel we've turned a corner, nationally. It's more significant than the Iraq war because, let's face it...it wasn't something we'd never done before, nor something that's unlikely to happen again.

The overly generous defined benefit (e.g. 80% of current pay retirement at 30 years with cost of living adjustment) pension promise has been a financial trap for companies, and United is far from the first to go bankrupt because they simply had no where near enough money to pay the promised pensions.

It's been a trap because it allowed management to underfund, creating a variant of the ponzi scheme where current payouts are maintained by current workers. That works ok while the company is hiring more new employees than it is retiring, but when things level off, as they always do, the depth of the deception becomes clear.

In theory, the pension plans of large companies are regulated and insured. 

In practice, for a variety of reasons, the regulation has been toothless to prevent underfunding.  Recall the phenomenom around 15 years ago dubbed "raiding the pension plan"?  Companies which had adequately funded their pension plans found themselves with the opportunity to recalculate the required funding to the minimum required by law, and to capture the difference as profit.  Some companies did this themselves, others found themselves bought up in a hostile takeover, and the buyer did the deed. 

Between 1985 and 1995, most companies changed to pay-as-you-go, defined contribution plans, which are neither raidable nor vulnerable to repudiation of promise. They are however exposed to market risk, with the benefit eventually paid out being dependent on plan performance.

Even more recently, the trend has been to expand 401k plans, which grant the worker the right to control asset allocation.

The exceptions to this sensible trend are starting to stick out: unionized companies and government. 

So in one sense, we've already progressed substantially into this space, and there's no reason to predict that one day things will hit with a horrible thud.  On the other hand, the unfunded pension promises made by various government agencies are vastly larger than those made by industry, well into the $trillions, as compared to a few hundred $billion for industry.

In practice, for a variety of reasons, the regulation has been toothless to prevent underfunding.  Recall the phenomenom around 15 years ago dubbed "raiding the pension plan"?  Companies which had adequately funded their pension plans found themselves with the opportunity to recalculate the required funding to the minimum required by law, and to capture the difference as profit.  Some companies did this themselves, others found themselves bought up in a hostile takeover, and the buyer did the deed.

There was no variety of reasons. There was only one: greed. It was a pure transfer of wealth from the working class to the corporate class.

And it worked because laws and regulations were changed to allow it.