The traditional corporate pension, which gives workers a guaranteed paycheck in retirement, has rarely looked more attractive--or been more endangered, pension experts say.
The Enron Corp. scandal and two years of back-to-back losses in 401(k) accounts have raised questions about the wisdom of shifting the responsibility for retirement saving to workers.
But far from enjoying a renaissance, traditional corporate pension plans are falling even further out of favor with employers.
For the first time in years, many companies will have to contribute money this year to pension funds that until recently had been bursting with returns from a booming stock market.
At the same time, the recession has increased pressure on companies to cut costs.
Pension experts believe this double squeeze will persuade more companies to shut down their pensions and discourage others from starting new plans.
"We'll see more plan freezes and plan closures," said pension expert Steve Vernon of consultant Watson Wyatt. "Some of the companies that are already cash-strapped won't be able to tolerate these [contribution] increases."
No one is predicting the extinction of traditional pensions, which cover some 36 million workers nationwide. The big, unionized industrial companies are unlikely to abandon their plans, pension experts said. But smaller plans are on the endangered list. And workers without pensions aren't likely to get them in the future.
The decline of the corporate pension could mean more workers reaching retirement age without enough money to retire, consumer advocates warn.
They point to disasters such as that at Enron--where workers lost $1 billion in 401(k) accounts heavily invested in the company's stock--as evidence that workers may not be the best stewards of retirement money.
"Ideally, the 401(k) should be a supplement to a traditional pension plan, not a substitute," said Karen Friedman, director of policy strategy for the Pension Rights Center.
Traditional pensions enjoyed a heyday after World War II and the Korean War, when wage controls forced employers to add benefits to compete for scarce workers.
But pensions lost ground with the decline of the manufacturing sector, where defined benefit plans typically are part of union-negotiated compensation packages, said Alicia Munnell, director of the Center for Retirement Research at Boston College. Traditional pensions also were pushed out, Munnell said, by employers' rush to 401(k) plans.
