Reply #45: Pension Loopholes Helped United Hide Troubles [View All]

[54anickel]

http://www.nytimes.com/2005/06/07/business/07pension.html?pagewanted=1&adxnnl=1&adxnnlx=1118152932-oOv0RQcmO1hvw9yX1bd2HQ

Loopholes in the federal pension law allowed United Airlines to treat its pension fund as solid for years, when in fact it was dangerously weakening, according to a new analysis by the agency that guarantees pensions. That analysis is scheduled to be presented at a Senate Finance Committee hearing today.

A second report, by the comptroller general, found that most companies that operate pension funds are using the same loopholes. Those loopholes give companies ways - all perfectly legal - to make their pension plans look healthier than they really are, reducing the amount of money the companies must contribute.

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"We saw similar practices and events at Enron, but unfortunately, this time it's perfectly legal," said Senator Charles E. Grassley, the Iowa Republican who is chairman of the finance committee. He said he had scheduled today's hearing because he wanted to find ways to keep pension disasters like the $10 billion failure at United from happening at other companies.

"The rules are full of serious holes that need to be fixed as soon as possible," Senator Grassley said. "No one should make the mistake that this is an airline-only problem. The reality is that companies everywhere have used the same arcane pension-funding rules" to shrink their contributions.

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Senator Grassley said he believed many companies were "booking phony investment gains to hide that workers' pensions are going down the tubes."

He said he hoped the hearing would lead to legislation that would eliminate the loopholes that made such maneuvers possible.

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