Enron Battles Agency Over Funding Of Pensions
By Albert B. Crenshaw
Washington Post Staff
Writer
Friday, August 6, 2004; Page E03
The government's pension insurance agency and the remains of Enron Corp. are
slugging it out in two different courts as the agency attempts to preserve
pension assets for Enron workers and retirees and the company seeks to emerge
from bankruptcy. Enron has said it intends to work out a "standard termination" for four of
its pension plans, which cover about 17,000 workers. Under that scenario, it
would buy annuities from private insurers to pay all the plan's benefits. The head of the government's Pension Benefit Guaranty Corp. said yesterday,
however, that Enron has made little progress toward that goal, and he questioned
the company's sincerity. The agency appears fearful that if the situation drags on, the company's
assets could be committed to other creditors, leaving PBGC to take over a deeply
underfunded group of plans. The dispute, which involves the bankruptcy court in New York and a U.S.
District Court in Texas, comes as the PBGC -- whose liabilities already exceed
its assets -- faces billions of dollars in actual and potential claims from
bankrupt steel companies and airlines. The shortfall in the pension plans of
bankrupt United Airlines alone is at least $7.5 billion. The PBGC filed suit in Houston in June seeking to terminate the four Enron
plans and to take over their assets and liabilities. It also objected to Enron's
reorganization plan in bankruptcy court, but that objection was overruled and
the plan approved. PBGC's claims against Enron total $321.8 billion, including a fifth plan it
has not sought to terminate. Enron asked the bankruptcy court on Wednesday to halt the Texas court action,
accusing the PBGC of "forum shopping" and trying to win in one court what it
could not get in another. PBGC Executive Director Bradley D. Belt, in a statement yesterday, said a
standard termination would be "the ideal outcome for participants and the
pension insurance program. "Unfortunately," Belt added, "by its own admission, Enron has failed to make
any progress toward executing a standard termination. With [its court action],
Enron raises even more doubts about its willingness to keep its pension promise
to workers and retirees. If Enron fails to carry out its commitment to do a
standard termination, the PBGC is ready to assume the pension obligations, pay
participants their guaranteed benefits, and pursue its claim against Enron for
the full amount of the underfunding." UAL Corp.'s United Airlines, meanwhile, has said it will not make required
payments into its underfunded plans. The PBGC has called that illegal and asked
the airline either to explain how it plans to make good on its obligations or to
concede that it cannot and so inform the agency. United contends that its
bankruptcy financing bars such contributions but argues that turning its plans
over to the PBGC would cut many workers' benefits sharply. The sides have met
once on the issue and are expected to meet again.