THE CORPORATE vultures who grabbed pension funds for profits in the 1990s are out to slash those retirement funds today--or abandon their obligations altogether.

The attack is sharpest in the airline and steel industries, where a series of bankruptcies in recent years have provided the pretext for dumping pension funds into the government-sponsored Pension Benefit Guaranty Corp. (PBGC). The PBGC, however, limits benefits to retirees--and faces a $9.7 billion shortfall because of the bankruptcies and the decline in the value of its assets, compared to a $9.7 billion surplus at the peak of the stock market boom of 2000.

Today, "the longer-term solvency of the pension insurance program...is at risk," PBGC Executive Director Bradley Belt said at a Senate hearing October 7 on the pension plans that cover just under half of all U.S. employees. A similar warning came from Hilda Ochoa-Brillembourg, a pension fund manager and former chief of the World Bank's pension investment division. "What you see with the airline pension funds now is an extreme version of what will happen in other industries," she told financial columnist Marshall Loeb. "Similar problems will occur in autos and other industries in the next five years."

According to this argument, the stock market slump and low interest rates have deflated corporate pension funds, while the coming wave of baby boom retirees will lead to a sharp increase in benefits paid out. Already, "defined-benefit" pension funds--retirement plans with fixed amounts of payments--are an estimated $320 billion in the hole.

A closer look, however, shows that the deficits in the PBGC and defined pension plans are highly misleading. There would only be such a shortfall if all such plans were to cease functioning at once. In fact, pensions funds inevitably go up and down with the overall economy. What matters is their ability to pay benefits over a period of decades, not the fund level in a particular year.

During the economic boom of the 1990s, for example, many companies found that their pensions were "overfunded" as funds' assets on financial markets increased in value. Rather than use the extra money to increase retirement benefits, leading companies simply transferred the proceeds into their earnings. According to the Wall Street Journal, pensions boosted reported profits by 3 percent that year for the S&P 500 group of large companies.

Now, however, companies are using the red ink in their pension funds to justify the reduction or elimination of retiree benefits. Earlier this year, legislation sponsored by Sen. Ted Kennedy (D-Mass.) allowed many companies to reduce their premium payments to the PBGC, which will only make the longer-term crisis worse.

"A good part of this has to do with corporations essentially walking away from their obligations," Paul Edwards, chair of the Coalition for Retirement Security, told Socialist Worker. "Since many corporations have been part of writing the legislation that effects them, it's a cozy position to be in."

US Airways--ironically, controlled by the Alabama state teachers' pension fund--has used its bankruptcy filings to dump the pilots' pension funds into the PBGC, and others are on the chopping block. United Airlines has stopped paying its pension fund premiums to the PBGC, and may abandon its funds as well.

The airlines justify these moves by pointing to their huge operating losses. Yet pensions are a long-term obligation that could be maintained--except for the fact that traditional airlines are intent on cutting costs to compete with new rivals like JetBlue, which don't have obligations to retirees.

The steel industry has followed the same strategy of ditching pensions and has eliminated health care benefits--which aren't insured--for some 260,000 retirees. Yet companies that can easily afford to meet pension obligations are cutting back. For example, in 1999, IBM converted its defined-benefit pension to a "cash-balance" plan, which creates virtual account for individual workers.

Earlier this year, IBM employees won a class-action lawsuit, arguing that the cash-balance plan discriminated against older workers by dramatically cutting their expected level of benefits, which had been calculated on a formula based on years of service and age. IBM has agreed to pay $300 million to retiree funds now and another $1.4 billion later if it loses its appeal of the ruling. In the meantime, companies are barred from creating new cash-balance plans--which today cover some 7 million employees.

Nevertheless, companies are continuing to replace traditional pensions with "defined-contribution" plans like 401(k) plans, so called because the amounts are determined by regular contributions to individual accounts by employers and employees. But these funds aren't insured at all--as employees of Enron, WorldCom and other companies found out when they lost their retirement savings amid the wave of corporate scandals.

All this ads up to a corporate abandonment of retirees, said the Coalition for Retirement Security's Edwards. "You have to understand that this is a scheme and scam used to defraud Americans of their pensions," he said. "We have an outrageous system, and it's getting worse."

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