The recent bankruptcies of Chrysler and General Motors have caused a lot of workers to be concerned about their pensions. While Chrysler has now emerged from bankruptcy GM is still going through the bankruptcy process and the question. “What will happen to my pension?” is very much on the minds of workers and retirees in the automotive sector – and elsewhere.
Are workers right to be concerned? Here’s what we know about the Chrysler and General Motors pension plans.
So far Chrysler and GM employees and retirees can rest assured that their pensions will not be terminated. Thanks to the efforts of the United Auto Workers union and others, both Chrysler and General Motors have pledged to continue sponsoring their pension plans during the bankruptcy process and beyond.
Contrast the actions of Chrysler and GM with those of United Airlines. When United entered bankruptcy, it dumped its pension obligations on the PBGC, the federal agency that insures pensions. It was the largest default by a company in the PBGC’s history, and thousands of pilots, flight attendants, and other workers were hurt in the process. A year later, when the company emerged from bankruptcy, it awarded its CEO and other top-level executives millions of dollars in bonuses and stock options.
Concerned that what happened to United pilots could happen to them, a group of Continental Airlines pilots allegedly faked divorces to try to protect a portion of their pensions that could be lost if their company were to go into bankruptcy. Watch PRC Policy Director Karen Friedman discuss why the pilots might have taken such extreme measures – and why they should have confidence in the PBGC – in an appearance on Good Morning America.
Fortunately, Chrysler and GM workers and retirees don’t have to worry about bankruptcy affecting their pensions, at least for now. But what if the two companies don’t recover and the pension plans of these two companies must be terminated?
Here’s what all workers and retirees should know about their traditional pensions:
Because traditional pension plans – like those of General Motors and Chrysler – are protected by the PBGC, workers and retirees in these plans will receive up to the PBGC’s maximum guaranteed benefit if their pension plan is terminated. For more information, read a PRC fact sheet on PBGC guarantees. The PBGC has set up a web page to provide information to auto-sector workers and retirees.
There are several groups working on behalf of automotive-sector retirees affected by the Chrysler and General Motors bankruptcies. Below are links to a few of their web sites:
See our list of organizations that are working to protect retiree benefits at other companies.