Pension Reality Hits Workers Hard in 2005
For workers with traditional pension plans, this was the year many had to face a harsh reality. Two of the major airlines, United and U.S. Airways defaulted on their traditional defined benefit pension plans. Verizon froze its pension. And the strike by transit workers in New York was partly about the fate of their pensions.
A United Airlines flight attendant for 15 years, Ellen Boone will be getting a lot less than she expected from her pension because United says it can no longer afford its obligations to her. Rather than the $2,000 per month she says she would have received, Boone's payout in retirement now will be $286 each month.
Boone is investing and saving through a 401K retirement account. But, at 43, she worries about making up what she's lost.
The shortfall Boone is facing is happening because United turned its pension obligations over to the federal government's Pension Benefit Guarantee Corporation. The agency has now assumed the liabilities of more than 3,000 corporate pensions.
This year about a quarter of a million people like Boone saw their pensions turned over to the agency. Private company contributions fund the agency, but its liabilities now exceed its assets. The worry is what will happen if more companies decide they can no longer afford their pension plans and dump them on the government.
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