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May 11, 2005

United Airlines

United Airlines was recently allowed to terminate their four employee pension funds as part of their bankruptcy proceedings in court. Going forward, United plans to offer defined-contribution programs to its workers (i.e. 401(k)s) instead of defined-benefit plans. Alex Tabarrok, writing for Marginal Revolution, offers this observation:

Now, let's review. A large organization counts on its younger workers and continuing high revenues to fund the pensions and medical care of its retired workers but finds that rising health care costs, longer life-expectancy, and its own inability to control spending force it to cut pension benefits and switch to personal accounts.

I think we all know what he's talking about. Ankle-Biting Pundit offers a more extended review of United's pension woes and the lessons we can learn from them.

Posted by Andrew Roth at May 11, 2005 8:58 AM | Print

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