The PBGC plans to file a formal objection today to UAL Corp.'s recent financing agreement with creditors, deferring the company's scheduled contributions to its United Airlines pension funds this year. The agency intends to ask the judge in U.S. Bankruptcy Court in Chicago to modify the financing agreement so Chicago-based UAL would be required to make the contributions. The PBGC also intends to update claims, up to $8.3 billion as of July 31, for unfunded liabilities on behalf of participants in the troubled airline's four pension plans.
"United's decision to stop funding its pension plans increases the risk of loss not only to the company's workers and retirees but to participants in other plans insured by the PBGC," Bradley Belt, executive director, said in a statement. But because the company is in Chapter 11 bankruptcy protection, the agency has little recourse but to ask the court to rule on the matter.
The PBGC estimates it would be liable for $6.4 billion in unfunded liabilities if the airline were to terminate all four United plans, while participants would lose a total of $1.9 billion in benefits that exceed the maximum payouts PBGC can legally make to participants.