Divorcing and re-marrying to collect a pension
In my recent post on greed, I wrote about how for the last generation corporations have been trying to get out of as many of their expensive obligations to workers as they can reasonably get away with. The list of obligations includes but is not limited to pensions, health care and job security.
One can debate whether they are being pulled into this unwillingly by competition from overseas or being pulled by the lure of large bonuses from cost cuts which boost shareholder returns. Either way, evidence that ordinary Americans are increasingly worried that corporations are looking to slough off their commitments onto workers comes from a case in Houston.
Was it a sudden spate of marital disharmony? Or were there mercenary motives at play? A US judge has thrown out a case brought by Continental Airlines against nine pilots accused of getting "sham" divorces in order to collect large payouts from an employee pension fund.
The Houston-based international carrier smelt a rat when a spate of its cockpit crew members dissolved their marriages between 2005 and 2007, only to remarry shortly after their spouses had obtained up to $900,000 under a loophole permitting lump sum pension payouts to divorced partners of staff members.
Continental fired the pilots and sued, claiming it had been duped into distributing between $10m and $11m under false pretences. But at a federal court in Texas, a judge has sided with the pilots, ruling that, irrespective of its employees’ motives, Continental cannot hold itself up as an arbiter of marital authenticity.
Are these pilots greedy or are they worried that Continental will dispose of its pension obligations in bankruptcy court much as other American airlines did post 9/11?
- Basics of the Pension Benefit Guaranty Corporation (pdf)
- PBGC Assumes Pensions of Aloha Airlines
- Effect of United Airlines pension termination on PBGC deficit (pdf)
Continental plans to appeal.