More old-line industries may follow United Airline's move to default on pension obligations.
The nation's private pension system is fraying and at risk of unraveling altogether.
The reason: More than three-quarters of the nation's traditional private pension plans are underfunded - which means they currently don't have enough assets to cover the benefits already promised to their workers and current retirees.
And the Pension Benefit Guaranty Corp. (PBGC), the government insurer that is supposed to guarantee workers some protections if companies go under, is facing a deficit of almost $30 billion.
Add to that the threat of more bankruptcies in old-line industries, from manufacturers to the so-called legacy carriers like United Airlines - which last week won approval to default on its pension obligations to 120,000 workers - and experts predict that millions more retirees may suddenly find themselves having to make due with less than they were promised.
"The broader issue of retirement security hasn't gotten enough attention heretofore," says Bradley Belt, executive director of the PBGC. "The retirement security fabric of this nation is increasingly tattered."
For millions of retirees, like former United pilot Bill Muller, the holes in the current system have already taken a toll. He retired in 2002, expecting to live comfortably on the six-figure pension he'd been accruing since he first went to work for United in 1969. Instead, he expects to lose 75 percent of that, even if the company successfully emerges from bankruptcy.
"It's such nasty news that it's hard to wrap your arms around this and understand the gravity of it," says Mr. Muller. "People have this idea that a pension is sacrosanct, that it can't be touched, but when you're in a situation like this you find that you have no control. And frankly, I think it's immoral to do to people in their 60s and 70s."
Currently, about half of Americans work for companies that offer some kind of retirement plan, whether it's a traditional defined-benefit pension; a 401(k)-type plan, known as a defined-contribution plan; or a mix of the two.