This is about retiree medical benefits, not pensions. Even in California, there's no problem with corporations terminating non-vested retiree medical plans. Bankruptcy is neither necessary nor useful for that purpose; a simple announcement will suffice.
Originally Posted by DREW WILEY
In post #37 I explained how US pensions work so those outside the country would understand the distinction between medical coverage and pensions. From employees' points of view, Pension Benefit Guarantee Corporation (PBGC) coverage provides quite good security of their vested monthly pension payments against company bankruptcies (up to certain dollar limits affecting highly compensated retirees). This protects against plan insolvency resulting from underfunding.
A new threat to pension security is now manifesting. Corporations able to get their pension plans up to 100% funded are permitted to perform a "standard termination." In this process, several options may be offered to those with vested benefits in the plan, among them cash buyouts, individual annuities or a master annuity for all participants. One corporation that recently took this route is General Motors (GM):
The PBGC must approve standard terminations, but has no incentive not to. When a retiree's company enters bankruptcy, beneficiaries of the qualified retirement plan can count on the PBGC to continue their monthly payment. After a standard termination such as GM's, those who are retired, depending on which choice they make now, will either be in full possession of investment yield risk, managing the lump sum payment they get on their own, or at the mercy of an insurance company's solvency, in this case Prudential. Their PBGC guarantee no longer exists. Approving "standard terminations" gets the PBGC out of potential future liability, so why wouldn't it approve?
To the small number of US workers still receiving or eligible for defined benefit pensions, I view plan "standard terminations" as the biggest threat, not company bankruptcies. Again, this pension tangent is completely separate from the thread's topic, namely non-vested retiree medical benefits, which could always be terminated at an employer's whim.