The government's pension agency moved to assume responsibility yesterday for United Airlines pilots' pensions, acknowledging as unfortunate but inevitable the carrier's elimination...

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CHICAGO — The government’s pension agency moved to assume responsibility yesterday for United Airlines pilots’ pensions, acknowledging as unfortunate but inevitable the carrier’s elimination of defined-benefit plans for its employees.

The move saddles the Pension Benefit Guaranty Corp. (PBGC) — already operating at a $23 billion deficit — with another huge financial burden. The agency estimated it will be responsible for about $1.4 billion of the plan’s $2.9 billion in underfunded assets, making it the third-largest claim in the history of the insurance program.

Separately, United flight attendants voted overwhelmingly to authorize intermittent strikes if the company carries out its threat to break their contract and impose new wage and benefit cuts.

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The two sides remain in talks over a new contract, and no action would be taken until the matter is resolved in bankruptcy court. Hearings on United’s motion to terminate the existing contract are scheduled to begin Jan. 7 if no agreement is reached.

“United flight attendants have spoken loudly and clearly,” said union leader Greg Davidowitch of the Association of Flight Attendants (AFA), announcing that 88 percent of members had approved taking unauthorized strike actions.

“They will not allow their employer to exploit the bankruptcy process and strip them of their rights. They are ready to fight.”

United said the Railway Labor Act and federal bankruptcy law bar the actions threatened by the union.

“We regret that the AFA continues to take actions which are simply not helpful to United, its tens of thousands of employees or its customers,” spokeswoman Jean Medina said.

“We remain committed to considering all workable options and alternatives that will still provide the long-lasting savings United needs to exit Chapter 11 successfully.”

Talks also continue with unions representing mechanics, baggage handlers and public-contact workers.

The pension agency will take over pensions of more than 14,000 active and retired pilots, many of whose benefits will be sharply reduced from what they were promised.

The PBGC already was facing the required takeover of United pension plans in 2005.

By acting at year’s end instead of in May, when the pilots’ pensions were to have been terminated, the agency said it can avoid the annual increase in mandated benefit payments and save as much as $140 million in additional payouts.

The action follows a tentative contract agreement between United and its pilots this month, part of the airline’s effort to slash labor costs heavily for the second time in its two-year bankruptcy restructuring.

Facing $4.1 billion in required pension contributions by the end of 2008, United had said it would terminate all its existing employee pensions and replace them with much less expensive defined-contribution funds, similar to 401(k) plans.

United issued a statement saying the PBGC’s decision “changes nothing with respect to our need to terminate and replace all four of our defined-benefit pension plans. As we have stated previously, even beyond termination and replacement of the four plans, we must achieve an additional $725 million in labor-cost savings to successfully emerge from bankruptcy as a sustainable, profitable enterprise.”

The pension agency had objected to the tentative deal with pilots, who dropped their opposition to the pensions’ elimination in exchange for additional financial considerations.

But it might have little recourse if the deal is approved in bankruptcy court.

“The decision to take over a pension plan is never made lightly, especially in situations where participants won’t get everything the company promised but failed to fund,” Executive Director Bradley Belt said.

“I hope the plight of participants in airline pension plans puts an exclamation point on the need for Congress to strengthen the funding rules for defined-benefit plans,” he said.

The pilots union deplored what it called an “ill-timed attempt to retaliate” against it and suggested it might be an “outrageous ploy” to undermine the contract-ratification vote under way among its members.

“[The union] will vigorously oppose any effort by the PBGC to take over the plan before May 1, 2005 or to single out the pilot group for punitive and vindictive treatment in the United bankruptcy,” said a statement by the leadership group of the Air Line Pilots Association’s United branch.

U.S. Rep. John Boehner, R-Ohio, chairman of the House Committee on Education and the Workforce, issued a statement calling it essential Congress act on the issue to protect the interests of workers, retirees and taxpayers.

The PBGC planned to file a formal objection to United pilots’ plan in bankruptcy court by today, spokesman Randy Clerihue said.

“We find the agreement objectionable on many grounds,” he said. “But this plan is going to terminate; it’s simply a matter of timing and dollars. Saving the additional money was important to us, given the size of our deficit.”