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Bankruptcy judge allows United to scrap pension plans

[JURIST] A US bankruptcy judge ruled Tuesday that United Airlines [corporate website] may sever its employees' pension plans, precipitating the largest corporate-pension default in US history. The ruling by Judge Eugene Wedoff [official profile] means that United employees will now receive their pensions through Pension Benefit Guaranty Corporation (PBGC) [corporate website] which initially opposed the plan, but later agreed to receive $1.5B in notes and convertible stock in a restructured UAL Corp. [backgrounder], United's holding company. The plan will save United $645M annually, a large chunk of the $2B needed for the company to pull out of Chapter 11 bankruptcy [SEC backgrounder]. Although the employees stand to lose thousands annually in pension benefits, Judge Wedoff said this is a better outcome than the company failing and the employees receiving no benefits. United's competition has expressed concern that the scrapping of its pension may give United a financial advantage over other struggling airlines. AP has more.

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Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

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