
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, June 19, 1990                   TAG: 9006190175
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-1   EDITION: METRO 
SOURCE: Los Angeles Times
DATELINE: WASHINGTON                                LENGTH: Medium

COURT PROTECTS PENSION

The Supreme Court Monday ruled that a corporation in bankruptcy can be forced to keep funding its pension plans, thus heading off a potential multibillion-dollar crisis for the federal agency that insures pensions for nearly 40 million Americans.

The 8-1 decision strengthens the powers of the federal Pension Benefit Guaranty Corp., which argued it faced a crushing burden similar to that experienced by the federal agency that insures savings-and-loan deposits.

The PBGC was created by Congress in 1974 to ensure that workers who were promised a pension would get it, even if their employer went out of business.

Under Monday's Supreme Court ruling, the PBGC will be an insurer of last resort, not a convenient way for employers to escape paying for their unfunded pension obligations by declaring bankruptcy.

"Forty million workers and retirees can sleep better tonight beause of today's Supreme Court decision," said Secretary of Labor Elizabeth Dole, who is chairwoman of the pension insurance board. The government's "victory in this case will help discourage unwarranted termination of pension plans and encourage better funding of pensions."

Though a victory for the pension agency and employees in general, it may prove a setback for employees whose company is bankrupt or on the verge of bankruptcy.

In this case, the Dallas-based LTV Corp. had said it could stay in business only if it were relieved of a $2.5 billion pension liability. In response to the ruling Monday, LTV issued a statement saying it "still cannot afford" to pay its pension obligations, despite a rebound in the steel business.

But LTV is not alone in having huge unfunded pension obligations. Last month, the agency released a list of 50 major American corporations with large, underfunded pension systems, including such familiar names as General Motors, Chrysler, Pan-Am and United Airlines. If those companies were to default on their obligations, it would cost the agency $14 billion, the PBGC said.

Last year, an appeals courts in New York relieved LTV of its pension debts, thereby casting doubt on the stability of the entire federal pension insurance fund. Appealing to the Supreme Court, the PBGC said that ruling drew a road map that could lead to financial disaster for the agency. Other companies with financial trouble would realize they could dump huge pension liabilities on the federal agency while staying in business.

Justice Harry Blackmun said the 1974 law gave the PBGC clear powers to protect the nation's private pension plans. It specifically "empowers the [pension] agency to restore" to the employer the duty to fund its pension plans in order to protect the federal insurance fund and prevent abuses.

by CNB