I have always wondered, what happens to a pension plan when the company files for bankruptcy? What happens if the lump sum payment is not enough for retirees? Are they financially screwed until they die?
I’ll share an anecdote I witnessed in my extended family–it was horrible. When US Air went bankrupt, employees with decades of service, expecting high five-figure to low six-figure annual income, learned they would get roughly $0.20 on the dollar. For many who were entering retirement, the impact was life-changing, and the stress and disruption it caused could well be argued as life-shortening.
PBGC did take over, but that did not solve the problem.
I believe the root cause was mismanagement of the pension, with the bankruptcy merely exposing this. But I wouldn’t be surprised if, at every opportunity during the bankruptcy process, changes were made that eroded the program’s health.
https://www.thestreet.com/investing/stocks/us-airways-pilots...