CHICAGO_A federal judge Tuesday upheld the termination of United Airlines pilots' pension plan in 2004, saying the government's pension agency acted responsibly in taking over the pensions despite objections by the pilots' union.
U.S. District Judge Joan Lefkow adopted the recommendation of federal bankruptcy court, where United parent UAL Corp. ended a three-year restructuring Feb. 1, that the Pension Benefit Guaranty Corp. had established at a trial that the move was a financial necessity.
"The court concludes that the termination of the pilot plan is necessary to avoid an unreasonable increase in PBGC's liability," Lefkow wrote in the opinion.
The pension agency said at the time of the Dec. 30, 2004, action that United's decision to eliminate defined-benefit plans for its employees was unfortunate but inevitable.
The PBGC, operating at a deep deficit, already was facing the required takeover of the United pension plans in 2005. By acting at the end of 2004 instead of the following May, when the pilots' pensions were to have been terminated, the agency avoided the annual increase in mandated benefit payments and estimated it saved as much as $140 million (€111 million) in additional payouts.
"This decision reaffirms the federal insurance program's ability to act on behalf of the 44 million Americans whose benefits it protects," Vince Snowbarger, acting executive director of the Washington-based agency, said in a statement following Lefkow's ruling.
The move resulted in reduced benefits for some of the more than 14,000 active and retired pilots whose pensions were taken over.
The United branch of the Air Line Pilots Association had no immediate comment on the ruling, spokesman Dave Kelly said.
United, which avoided billions of dollars in impending pension obligations with the move, maintains it had to terminate the pensions in order to successfully restructure and return to profitability.
