I believe corporate pension plans are a con.

I'm sorry. Does that sound harsh? If you think it does, then I suspect you never worked for Bethlehem Steel. Back in 2006, I penned a short missive on the rise and fall of the fabled Pennsylvanian steelmaker. I described how the company, wildly successful in its day, ultimately tumbled head over heels into bankruptcy in 2001 -- sending pieces of the company into foreign ownership by Mittal Steel (NYSE:MT), savaging the pensions of its 11,500 workers and 120,000 retirees in the process, along with wiping out their medical coverage entirely.

While I've no way of knowing for certain, I have to wonder whether a certain handful of Continental Airlines (NYSE:CAL) pilots -- destined to go down in history as "The Continental Nine" -- have taken that story to heart.

Is past prelude?
 "Whether by design or incompetence, the managements of many of America's greatest companies of yesteryear are today unable to keep their word. As Steve Miller, the man brought in to "save" Bethlehem Steel in 2001, put it: "We do not have the money to make good on all the promises made by this corporation over the last 50 years."

So ended my column on the subject of BethSteel. And while Miller's honesty was refreshing, I imagine it came as cold comfort to the employees who toiled away for those "50 years," accepting salaries lower than they might else have demanded, in exchange for promises of a secure retirement. Considering the state of the American economy today, and the rising number of bankruptcies -- Circuit City, Lehman Bros., and there-but-for-the-grace-of-Chase (NYSE:JPM) went Bear Stearns -- I have a lot of sympathy for those hoping to avoid the BethSteel employees' fate.

The Continental Nine
Namely, the nine pilots and their spouses whom Continental Airlines is currently suing. During the long weekend, newspapers began reporting on the story of these nine intrepid flyers, who sought to "beat the system" -- and beat the bankruptcy clock -- by allegedly rigging the game on their own pensions.

The Continental Nine were all veteran pilots for the airline, you see. Well-paid folks, and destined to retire in luxury... if their airline lasted that long. Problem was, they didn't think it would. (Speculation that Continental was the airline behind a recent cancellation of 25 orders for new Boeing (NYSE:BA) 787s might have bolstered the fear, but Continental says its orders are still in place.)

In any case, the pilots employment contracts allowed that in the unfortunate event of their marriages dissolving, they could accelerate payment of their pensions if their (ex) spouses so demanded.

Hmm ...
And so they did. Each pilot-spouse pair divorced. The spouse sued for lump-sum payment of the pilot's pension benefit, and the court ordered same. The spouse then cashed in the pension, valued up to $900,000 ... and then wonder of wonders, in a true After-School Special moment, the spouses miraculously reconciled, remarried, and hoped to live happily ever after.

Not so fast
Now you may ask yourself: Why go to all that bother? The answer is clear. Back in 2005, a troubled airline industry saw each of Delta Air Lines (NYSE:DAL), United Airlines (NASDAQ:UAUA), and US Airways (NYSE:LCC) declare bankruptcy, and offload their pension obligations on the federal Pension Benefit Guaranty Corporation -- a la BethSteel, and with similarly dire results for the affected retirees. Being in the airline biz themselves, the Continental Nine had front-row seats to their compatriots' disaster, and had no desire to experience it themselves. So they found this workaround.

Unfortunately for them, Continental was not amused -- and has sued pilots and spouses both for engaging in "subterfuges or sham transactions." Continental wants its money back, and has already demanded the resignations of (or failing that, fired) eight pilots, with the ninth admitting fraud and agreeing to pay back the funds.

Think before you con ... and after
So what's the moral of this story, you ask? For the pilots, it's that the wages of sin are ...

  • loss of employment, and salary -- that's a certainty;
  • possible loss of their ill-gotten loot to boot, as Continental's lawsuit progresses;
  • lawyers' bills, and bills, and more bills;
  • and perhaps worst of all, the loss of the respect of their peers -- for while the Continental Nine "got theirs" (at least temporarily), they did so by siphoning off pension funds that their fellow pilots will need in the event Continental does ultimately land in bankruptcy court.

And the lesson for the rest of us? If you're nearing retirement, and hoping to live off a pension, it's only prudent to ask how certain you are that your employer has the money to honor its promises? If the answer falls anywhere short of "absolutely certain," then it's time to start planning alternate retirement scenarios (that don't involve breaking any laws). Because if your employer proves unable (or unwilling) to care of you, and your government fails to pick up the slack, then there's only one person left who can guarantee a successful retirement for yourself and your family: You.