The recent announcement by United Airlines that they were defaulting on four employee pension plans with $9.8 billion in obligations to 134,000 employees has made it clear that the retirement crisis is already here. Some United employees will now have their pension checks cut by as much as 70%, and they are not alone.

     United is just one of dozens of U.S. corporations with huge unfunded or underfunded pensions. Pension plans are also in jeopardy at GM, Ford and many other companies.

     According to the Pension Benefit Guaranty Corporation (PBGC) – which supposedly "guarantees" the pensions of US companies – $96 billion in pension plans are now classified as below investment grade and subject to possible termination. And that’s just the tip of the iceberg. Some $450 billion in pension plans are classified as "underfunded," up from $350 billion in 2003.

     The PBGC itself is in big trouble and could even face bankruptcy in the next few years without a taxpayer bailout. PBGC had a $23 billion deficit for 2004, and that's sure to get worse as more and more companies default in their pension plans. Further, PBGC pension “guarantees” fall far short of full coverage. For instance, Weiss Research reports that if you retire at 55 and your plan failed in 2000, your maximum benefit is just $17,397 a year.

     By any standard, the pension default by United and other U.S. companies is simply outrageous.

     Pension funds are supposed to be set aside by companies in separate accounts so they will be there when employees retire. Instead, dishonest company officials have been commingling pension funds with other company revenues, and using them to fund current expenses, pay executive perks, and to fund corporate expansion. The PBGC reports that during the past six years, many large companies have put nothing into their pension accounts.

     As Jonathan Tasini, president of the Economic Future Group, comments:

"Corporate America has used what is effectively workers' money to finance mergers and acquisitions, and a lavish lifestyle for executives."

     One worker who found her pension cut by 65% put it more bluntly: “I have worked my whole life for nothing.”

     The massive corporate default on pensions is fraud any way you look at it, and the corporate officials responsible should have their personal assets attached to pay off their obligations to employees, and then be put behind bars, like any other thief.

     Instead, courts have quietly OKed United's default on their pension guarantees. This sends precisely the wrong message to companies, that it's OK to lie to employees and loot their retirement savings – encouraging hundreds of other irresponsible corporate managers to follow suit.

     With huge impending Social Security deficits, the last thing we need is to force taxpayers to fund the retirement of millions of additional people impoverished by corporate fraud.

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