Executives Get Pension Security While Plans for Workers Falter
A number of large companies are setting aside millions of dollars to protect pensions of top executives, even as they forgo contributions to financially strained pension plans for other workers.</br></br>The issue of inequity in pension plans is heating up in the airline industry, amid recent disclosures that AMR Corp., Delta Air Lines and UAL Corp. had poured millions into special pension trusts for executives. That angered workers who have seen their own pension plans ravaged by weak stock markets and low interest rates. At AMR's American Airlines, employee outrage over the issue is threatening delicate labor talks that are crucial to keeping the company from filing for bankruptcy protection.</br></br>Some other companies that also have established such pension trusts for executives include Motorola Inc., Owens-Illinois Inc., TXU Corp., Altria Group Inc. (formerly Philip Morris), and Abbott Laboratories, according to regulatory filings.</br></br>Companies that contribute to pensions for executives -- while choosing not to fund regular pensions -- aren't breaking any laws. Federal rules require companies to make minimum contributions if their pension plans become excessively underfunded. That occurs when liabilities exceed assets by too great a margin as defined by the Internal Revenue Service. But companies can coast for years with pensions that have just two-thirds or three-quarters of the money they would need to pay their future obligations.</br></br>The practice illustrates the growing gap in retirement security between most employees and those at the very top. As senior executives rely more on their special pensions, they have less incentive to ensure that the regular pension plan offers adequate benefits -- or is adequately funded. Executives' special pensions also are increasingly being sheltered from their companies' financial troubles, including bankruptcy.