Retiree pensions are at risk

Fed insurer fears auto failures

By David Shepardson / Detroit News

Washington -- General Motors Corp. and Chrysler LLC retirees and employees could lose $23 billion in pension benefits if the companies terminate their retirement plans in bankruptcy, the government's pension insurance agency warned Tuesday.

Neither GM nor Chrysler plans to file for bankruptcy, but both are taking steps to prepare in case they are forced to do so in the coming weeks. While neither has said it plans to terminate its pension program, struggling steel companies and airlines have used bankruptcy to get out from under large pension obligations and turn them over to the government.

GM and Chrysler combined provide pension benefits to about 630,000 retirees and dependents, and cover another 300,000 who haven't begun drawing benefits.

The Pension Benefit Guaranty Corp. (PBGC) insures the pensions of 44 million Americans, including 1.5 million in Michigan. Its representatives have met repeatedly with the Obama auto task force on the impact of a GM or Chrysler pension plan termination, and have been making preparations for the possibility.

PBGC acting director Vince Snowbarger said Tuesday that termination of either pension plan would have a major impact on retirees.

"The fact is that people are going to see some reductions that obviously they hadn't planned for (if GM or Chrysler terminates its pension plan). They have had a promise made to them that is not being kept and all we can do is try to step in and help out a little bit," he said.

While acknowledging the pain retirees would face, Snowbarger said: "We're going to have the funds to pay these folks for the foreseeable future."
If GM terminates its pension plan, the PBGC would assume $4 billion of the $20 billion that would be unfunded, the agency said.

At Chrysler, it would assume $2 billion of the $9.3 billion shortfall. In January, PBGC said Chrysler's plan is 34 percent underfunded and GM's plan is 20 percent underfunded. GM uses a different set of accounting rules and says its plans were underfunded by $12.7 billion as of Dec. 31.

Young retirees would be hit hardest. They'd qualify for a much lower maximum pension if their company plan were assumed by the government -- $18,900 a year at age 50. Retirees who are 65 can get up to $54,000 a year.

GM's salaried retirees are very concerned about how a bankruptcy filing might impact pensions, said Jack Dickinson, president of the General Motors National Retiree Association.

"We're also concerned with hourly (retirees), but they have union representation. We don't," said Dickinson, a retired manager. "We're looking for (PBGC) to say they don't want to touch it at all. If they take the fund over, then we'll all take drastic losses, 50-60 percent losses."