Pension case used to push Social Security

updated 5:58 p.m. ET May 11, 2005

WASHINGTON - House Democrats said Wednesday that United Airlines’ success in winning court approval to terminate its employee pension plans underscores the need to preserve a traditional Social Security benefit.

“For those pilots, for those flight attendants, for those mechanics, for those ramp employees, Social Security this morning is much greater percentage of their total retirement package than they had ever anticipated when they started working for United Airlines,” Rep. George Miller of California, top Democrat on the House Committee on Education and the Workforce, said after emerging from his party’s weekly caucus meeting.

Rep. James Clyburn, D-S.C., noted polls show less than a majority of Americans support a White House overhaul of Social Security that includes creating private investment accounts. “I think the headlines today will help them make up their mind and they will join that 60 percent who now oppose what the president is proposing,” the congressman said.

Bush administration fires back
The White House took the opposite view, arguing the United case underscores the need for Social Security reform.

“The UAL situation is Exhibit A in the debate about why we must shore up America’s retirement security program now, so that workers can be assured that they will have a decent retirement,” said spokesman Trent Duffy.

FULL COVERAGE United, union hung up over pensions Forbes.com: The end of pensions? Pressure on airlines to seek pension relief Pension case used to push Social Security United gets approval to shift pension plans VOTE: What do you think about United?

On Tuesday a federal judge in Chicago allowed United, a unit of UAL Corp. which is operating under bankruptcy protection, to terminate its four employee pension plans. The Pension Benefit Guaranty Corp., the federal agency that guarantees pensions, will assume responsibility for $6.6 billion in obligations under the plans, which cover roughly 120,000 current and retired workers. Those workers face the risk of sharp benefit cuts.

Such defined-benefit pension payments are part of the so-called three-legged stool that financial planners recommend for retirees. The other two are personal savings through 401(k) and IRA accounts, as well as government-backed Social Security benefits.

Bush wants private accounts, means testing
With the Depression-era program facing the impending challenge of paying benefits to retiring baby boomers, President Bush has proposed allowing workers to create private investment accounts that will pay a portion of their future benefits. Last week, he also endorsed the idea of changing the way future benefits are calculated, using a “progressive indexing” scale that would reduce expected checks for all but low-income workers making less than $30,000 annually.

Democrats have been near-united in opposing the administration proposal, arguing it is a stealth attempt to wean Social Security of its funding, and to shift a critical “leg” of retirement funding from the government to the individual. In particular, they have demanded that Bush drop his account proposal because it would require trillions in government borrowing — money needed to cover full benefit payments for existing retirees while younger workers divert a portion of their payroll taxes to start up the proposed personal accounts.

Hearing Thursday on Bush plan
Rep. Charles Rangel of New York, the top Democrat on the House Ways and Means Committee, which on Thursday holds a hearing on Bush’s proposal, said after leaving the Democratic caucus: “Mr. President, you have a lot of capital, but not enough to sell this doggone elephant to the people of America.”

Rangel labeled the borrowing needed to start up the accounts as the “rape of the Social Security trust fund,” and declared: “It’s going to be middle-income people, the same people that are losing their pension benefits, who are going to be treated as though they’re wealthy and be denied the benefits that they would’ve ordinarily deserved, while we try to entice the working poor people that they’re going to get more than they normally would.”

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