Using Chapter 11 to Shed Extravagant Benefit Packages

In May of this year, a bankruptcy court allowed United Airlines to terminate certain of its defined benefit pension plans, clearing the way for the largest pension default in U.S. history. The default will save United an estimated $645 million a year in pension contributions, part of the $2 billion in annual savings it says it needs to emerge from Chapter 11. United's success has led to speculation that other corporations with generous and/or underfunded pension and other retiree benefit plans will also use bankruptcy to clean 'legacy costs' off their balance sheets. Modification or termination of such liabilities in Chapter 11, however, is not without difficulty.

26 minute read October 28, 2005 at 10:19 AM
By
ALM Staff and Law Journal Newsletters
Using Chapter 11 to Shed Extravagant Benefit Packages

In May of this year, a bankruptcy court allowed United Airlines to terminate certain of its defined benefit pension plans, clearing the way for the largest pension default in U.S. history.

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