ND ReSource: United’s pension default shows need for multi-employer plan

Author: Shannon Chapla

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United Airlinescourt victory Tuesday will allow the embattled company to dump its four pension plans, smoothing the path toward an exit from Chapter 11 bankruptcy later this year.

However, University of Notre Dame economist Teresa Ghilarducci says it was not a win for United workers or the current benefit system and points to a need for a multi-employer plan similar to that utilized by the railroad industry.

What is happening in airlines happened in railroads in 1919,said Ghilarducci, associate professor of economics and director of theHigginsLaborResearchCenterat Notre Dame.The defined benefit pension plans of the mature and large railroad companies were threatening to default because workers were beginning to retire in large numbers and low-cost small start-ups were invading their routes and slashing haul rates because they provided no benefits and paid low wages. Instead of making the railroad workers pay by having their pensions cut, the government created a multi-employer pension planthe Railroad Retirement plan that was a precursor to Social Security.

Ghilarducci says railroad workers still have a strong defined benefit plan portable anywhere in the industry, regardless of the death and birth of individual companies, and so should the airlines.

All the airlines, regardless of size, should pay into a similar retirement fund and so should airline customers, through a surcharge on a plane ticket, to restore the airline workers’ pensions,she said.If airlines would dump the Pension Benefit Guarantee Corporation and move to a multi-employer plan for the industry,the rest of the defined benefit system would be in better shape.

Teresa Ghilarducci is available for interviews at 574-631-7581 or ghilarducci.1@nd.edu * __ *

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