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Will Taxpayers Be On The Hook For American Airlines' Pensions? (Yes)
npr ^ | 2/2/2012 | Caitlin Kenney

Posted on 02/02/2012 4:19:37 AM PST by tobyhill

American Airlines filed for bankruptcy in November. The company needs $18.5 billion to cover its pension promises to current and former employees, but it has only set aside $8.3 billion.

Taxpayers could wind up on the hook for billions. Here's why.

American Airlines is asking the bankruptcy court for permission to drop its pension plans. If the court allows that, the plans will be taken over by the Pension Benefit Guaranty Corp, a government agency that takes over pension plans for failed companies.

The PBGC works like an insurance company. Firms that are backed by the PBGC pay premiums to the agency. Those premiums are supposed to pay for the agency's costs, so taxpayers don't have to pay. But in recent years the premiums haven't been enough — the agency's funding shortfall is currently $26 billion.

President Obama has proposed raising the premiums companies pay to PBGC, to make up the shortfall. But big business groups oppose any increase.

(Excerpt) Read more at npr.org ...


TOPICS: Extended News; News/Current Events
KEYWORDS:

1 posted on 02/02/2012 4:19:38 AM PST by tobyhill
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To: tobyhill
President Obama has proposed raising the premiums companies pay to PBGC, to make up the shortfall.

That Socialist bastard!

But big business groups oppose any increase.

Duh. When you can just lay it all off on the taxpayer, why would you want to pay for it yourself?

2 posted on 02/02/2012 4:23:32 AM PST by Wolfie
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To: tobyhill

We must save Union Pensions, the greedy tax payers have too much money and can do without.


3 posted on 02/02/2012 4:29:00 AM PST by yuleeyahoo (Liberty is not collective, it is personal. All liberty is individual liberty. - Calvin Coolidge)
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To: tobyhill

Here is a better idea.......... businesses will begin to dump their pension problems on the government en masse... any company that does this should have all assets seized and sold at auction, including the owners and officers personal assets.........unless genuine need is proven


4 posted on 02/02/2012 4:29:44 AM PST by joe fonebone (Project Gunwalker, this will make watergate look like the warm up band......)
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To: Wolfie
"When you can just lay it all off on the taxpayer, why would you want to pay for it yourself?"

Sounds like Welfare, Section 8 housing, UAW, etc., etc. Now, we'll soon pick up the tab for houses that were mortgaged under threat of Red-lining Lawsuits by banks to welfare-income-only parasites, AND, we're running out of Taxpayers (why work a minimum wage job when you can stay on un-employment for up to 2 years?)

5 posted on 02/02/2012 4:31:06 AM PST by traditional1 (Stay thirsty, my friends.)
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To: tobyhill
As I read this, and think about the costs of doing business in America, it becomes clear that we cannot sustain our standard of living without some dramatic changes.

It's kind of interesting that despite our wonderful ‘Social Security’ system that takes money out of our paychecks and puts it into a ‘lockbox’ for us (sarc), companies are being crushed under the weight of their pension plans.

6 posted on 02/02/2012 4:32:40 AM PST by pieceofthepuzzle
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To: tobyhill

I think the same thing happened with United and the retirees ended up getting shorted.


7 posted on 02/02/2012 4:46:27 AM PST by ILS21R (Never give up.)
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To: tobyhill

Pension obligations always seem to be years out from being needed, until they all of a sudden aren’t or when bankruptcy looms and the cash for pensions or the sudden lack of obligation would save the company.

The state of the economy is certainly part of the whole problem with the zero interest rate the FED so jealously guards as another issue.

I suspect if companies or governments were forced to have every dime of pension obligations in a non money losing account, there would be no such thing as a pension. Seems to me annuities would be a less expensive alternative to having every dime squirreled away.

Apparently that is also deemed too expensive. Insurance companies can also go broke, although the rules under which they must operate, do tend to make them somewhat more responsible, and less likely to go under.

Bottom line, the taxpayers need to revolt on this and every other attempt at pushing financial foolishness off on the public.


8 posted on 02/02/2012 4:46:47 AM PST by wita
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To: joe fonebone
any company that does this should have all assets seized and sold at auction, including the owners and officers personal assets.......

So then the employees have pensions intact but no job.

AMR had been the only major airline since 9/11 not to go invoke bankruptcy protection to reset their labor contracts ... this mess has been a long time in the making and there's lots of blame to spread around.

9 posted on 02/02/2012 4:50:32 AM PST by RygelXVI
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To: RygelXVI

valid point.......... requires further thought....my main bitch is putting the taxpayers on the hook for a private companies pension plan... THAT is just not right


10 posted on 02/02/2012 5:04:13 AM PST by joe fonebone (Project Gunwalker, this will make watergate look like the warm up band......)
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To: joe fonebone

Wow, sieze all stockholder’s personal assets. That’s some idea.


11 posted on 02/02/2012 5:14:52 AM PST by biggerten (Love you, Mom.)
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To: tobyhill

Why wouldn’t the requirements for participating in this insurance program require that the pensions be always fully funded? How is an underfunded pension fund different from ignoring drunk driving and speeding tickets when determining auto insurance premiums?


12 posted on 02/02/2012 5:15:50 AM PST by bjc (Check the data!!)
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To: ILS21R

http://www.pbgc.gov/wr/benefits/guaranteed-benefits/maximum-guarantee.html


13 posted on 02/02/2012 5:26:21 AM PST by EVO X
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To: tobyhill

that’s what the government is for. To take care of everyone. Once they own you, they can tell you what to do.


14 posted on 02/02/2012 5:28:51 AM PST by paul51 (11 September 2001 - Never forget)
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To: EVO X

That explains it. Thank you.


15 posted on 02/02/2012 5:31:03 AM PST by ILS21R (Never give up.)
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To: RygelXVI

You forgot Southwest.


16 posted on 02/02/2012 5:54:52 AM PST by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: biggerten

just double checked my post... did not say anything about stockholders... owners and officers is what I said...


17 posted on 02/02/2012 6:05:58 AM PST by joe fonebone (Project Gunwalker, this will make watergate look like the warm up band......)
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To: Spktyr
You forgot Southwest.

Southwest doesn't qualify as an American airline. It's well run and well regarded by the public.

18 posted on 02/02/2012 6:09:59 AM PST by RygelXVI
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To: joe fonebone

The stockholders ARE the owners. That’s the definition.


19 posted on 02/02/2012 6:18:28 AM PST by biggerten (Love you, Mom.)
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To: RygelXVI

Yet it does qualify as a major airline these days. :P


20 posted on 02/02/2012 7:03:30 AM PST by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: biggerten

If we are going to get all petty about it, Please allow me to rephrase for those unable to determine what direction this is going in without detailed analysis... The CEO, CFO, President, all Vice Presidents and anyone that makes day to day decisions in Upper management that determine whether or not the company is operating in the black or the red... If you want it in simple terms for the simple minded, THOSE THAT DROVE THE COMPANY DOWN THE TUBES PAY THE PRICE...

Is this clear enough for you?


21 posted on 02/02/2012 7:08:41 AM PST by joe fonebone (Project Gunwalker, this will make watergate look like the warm up band......)
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To: joe fonebone

Petty about it? You make a statement to seize all the assets of the owners, I call you on it, it becomes clear you don’t understand the situation, so I’m petty.

All right then.

Sometimes, companies go bankrupt for reasons beyond anyone’s control, what do we do then?

Besides, the directors and officers are already subject to your proposed solution. If they fail to act in the interests of the stockholders, they failed their fiduciary duties, and they are subject to not only civil liability, but criminal, as well. The CEO and CFO of my last company paid millions in fines, and went to federal prison (where they belong). I expect (but don’t know) they be completely broke when they get out. If the fines didn’t break ‘em, I expect the lawyers fees did.

In fact, us ex-employees would like to take up a collection to by Viagra for their cellmates.


22 posted on 02/02/2012 8:19:26 AM PST by biggerten (Love you, Mom.)
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To: joe fonebone
just double checked my post... did not say anything about stockholders... owners and officers is what I said...

You wrote: "any company that does this should have all assets seized and sold at auction", which I interpreted as company assets.

Those assets are effectively owned by the stockholders.

What you propose is no different than screwing the stockholders and secured bond holders and giving the company to the union. And that's exactly what Obama did with GM and Chrysler.

23 posted on 02/02/2012 9:44:36 AM PST by justlurking (The only remedy for a bad guy with a gun is a good WOMAN (Sgt. Kimberly Munley) with a gun)
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To: biggerten
"Sometimes, companies go bankrupt for reasons beyond anyone’s control, what do we do then?"
that is why I said in my original post ( that you obviously did not bother to read in it's entirety ) that it depends upon the circumstances......
24 posted on 02/02/2012 10:06:35 AM PST by joe fonebone (Project Gunwalker, this will make watergate look like the warm up band......)
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To: justlurking

1)... If a company goes bankrupt, the last time I checked, the stock value is pretty much zero.

2) If the stock value is zero, then the stockholders already have zero equity.

3) If it comes down to the stockholders getting burned, or having my taxes raised (even if i have zero stock in said company) then the stockholder took the risk by buying stock, therefore, they will get burned.

4) The reason I said all upper management should be held liable is because most if not all of the time, these officers walk away with millions, while stockholders and taxpayers get burned.

5) Why should I pay more money to make you whole????


25 posted on 02/02/2012 10:11:54 AM PST by joe fonebone (Project Gunwalker, this will make watergate look like the warm up band......)
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To: tobyhill
The PBGC works like an insurance company. Firms that are backed by the PBGC pay premiums to the agency. Those premiums are supposed to pay for the agency's costs, so taxpayers don't have to pay. But in recent years the premiums haven't been enough — the agency's funding shortfall is currently $26 billion.

If we don't have the money to maintain social security, then we don't have the money to prop up pension plans either. Abolish PBGC and put the union workers on notice that pension shortfalls will not be covered, and will result in reduced pension payouts.

Any future employees get 401Ks like the rest of us.

26 posted on 02/02/2012 10:19:36 AM PST by PapaBear3625 (I'd agree with you, but then we would both be wrong.)
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To: joe fonebone

Oh, I read it through. Did you read it through? ‘Cuz you sure didn’t think it through. You for sure were ignorant of the fact that stockholders were owners. Must have missed class that day.

Here’s your original post.

“Here is a better idea.......... businesses will begin to dump their pension problems on the government en masse... any company that does this should have all assets seized and sold at auction, including the owners and officers personal assets.........unless genuine need is proven”

Nowhere did you differentiate as to why the company went bankrupt. Only some vague concept as to keeping some assets when some “genuine need is proven”. It’s not clear whether you meant corporate or personal assets under that phrase. Just an ill formed, bad idea, based on your emotional reactions. You should go post at Democratic Underground.

Have a nice day, we’ve talked this to death.


27 posted on 02/02/2012 10:34:57 AM PST by biggerten (Love you, Mom.)
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To: joe fonebone
1)... If a company goes bankrupt, the last time I checked, the stock value is pretty much zero.

It depends on the bankruptcy. Chapter 7 is liquidation. Chapter 11 is reorganization. In a Chapter 11, the stockholders can end up with some equity.

AMR has been delisted and is a pink-sheet stock, but it still has value today.

Even in a Chapter 7 liquidation, the secured bond holders have first claim to the asset(s) that secure the bond: it was a condition of loaning the money. However, that has been turned on its ear by the criminals in the Obama administration.

2) If the stock value is zero, then the stockholders already have zero equity.

See above.

3) If it comes down to the stockholders getting burned, or having my taxes raised (even if i have zero stock in said company) then the stockholder took the risk by buying stock, therefore, they will get burned.

Your taxes won't get raised unless the PBGC can't meet its obligations. If they can't meet their obligations, it's not the fault of the company that has been paying the PBGC premiums. The premiums are set by the PBGC, and the company doesn't have the choice of paying them.

4) The reason I said all upper management should be held liable is because most if not all of the time, these officers walk away with millions, while stockholders and taxpayers get burned.

Under the law, a corporate officer is not personally liable for the failure of a company unless it can be proved he/she willfully or negligently acted against the interests of the company and the stockholders. That's a pretty difficult threshold to achieve.

5) Why should I pay more money to make you whole????

Because the federal government says you have to. Congress passed the law long ago. You don't like it? Complain to them.

28 posted on 02/02/2012 10:58:24 AM PST by justlurking (The only remedy for a bad guy with a gun is a good WOMAN (Sgt. Kimberly Munley) with a gun)
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To: biggerten

go pull your alinsky tactics on someone else.... it just don’t work with me.... however, you are correct... this discussion is over


29 posted on 02/02/2012 11:06:56 AM PST by joe fonebone (Project Gunwalker, this will make watergate look like the warm up band......)
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To: justlurking

damn..... an intellegent person whit an intellegent reply... I just do not know where to begin ( this is not sarcasm )

I would agree with you on both one and two... as for number three, the article is about the pbgc not being able to meet it’s obligations currently.. therefore the logical conclusion is that i will either have my taxes raised, or services reduced, in order for the government to meet the obligations of a private pension plan...

I agree with your description of number 4, but I disagree with not being able to persue them if they are doing shady, but legal deals. I also cannot agree with them taking millions after the fact. That cash should go to meet obligations.

As for number 5, i write and keep in contact with all my representatives in government... but if the sheeple keep electing them, we are all toast... might be time to take up operation cheapskate again ( starve the beast )..


30 posted on 02/02/2012 11:32:56 AM PST by joe fonebone (Project Gunwalker, this will make watergate look like the warm up band......)
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To: joe fonebone
as for number three, the article is about the pbgc not being able to meet it’s obligations currently.. therefore the logical conclusion is that i will either have my taxes raised, or services reduced, in order for the government to meet the obligations of a private pension plan...

Yeah, I should have said: "WHEN the PBGC can't meet their obligations." It sucks, but that's how they set it up -- just like Fannie Mae, Freddie Mac, Sallie Mae, and myriad public employee pension plans that are under-funded.

I agree with your description of number 4, but I disagree with not being able to persue them if they are doing shady, but legal deals. I also cannot agree with them taking millions after the fact. That cash should go to meet obligations.

If it's legal, then it's not shady -- at least according to the law. And, here's the gotcha: when C-level officers get their golden parachutes, it's honoring a contract. The company offered them that guarantee when they hired the employee, and the company is obligated to fulfill it. Depending on the terms, the obligation may come before other obligations.

No one else gets that kind of guarantee, but it has become "normal" to entice executives to jump ship. Do they deserve it? It depends. Steve Jobs deserved his: after being squeezed out of Apple, they offered him a big incentive to return. And it paid off, big time. Of course, there are plenty of examples where the parachute wasn't deserved.

However, the fault or the credit for offering parachutes to C-level executives lies with the Board of Directors. And they are elected by the stockholders. So, the practice will only be curbed if stockholders demand it, and vote out board members that don't listen.

31 posted on 02/02/2012 1:02:23 PM PST by justlurking (The only remedy for a bad guy with a gun is a good WOMAN (Sgt. Kimberly Munley) with a gun)
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To: tobyhill
my husband was put on the "Peanut Butter and Jelly" board as I call it...since his company bellied up when he was in his early 50's...he gets about 1/3 of what his 27 yrs should have gotten him...plus loss of health insurance in retirement...although he does get a credit on taxes for the insane amount I pay on my plan for him...

if you're in your 60's...or already retired, I thin the Board pays pretty good....otherwise, its a huge hit...

32 posted on 02/02/2012 2:22:34 PM PST by cherry
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To: joe fonebone
I am on the hook for every fed or county or city employee who retires at age 38 on up....

when somebody realizes that we can't pay retirement to anyone at these ages, then maybe this country will get straight again...

in the meantime, we're on the hook for all of these retirees...

33 posted on 02/02/2012 2:25:36 PM PST by cherry
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