Corporate America Pulling Back Pension Safety Net

WASHINGTON — Last week's court decision permitting United Airlines' parent to dump its pensions on the federal government is part of a sweeping trend that could make the nation's employers more competitive, but at the cost of leaving workers and their families bearing big new risks.

In a nutshell, a broadening swath of corporate America is retreating from the safety-net business and is shifting responsibility to employees.

The decision by a Chicago bankruptcy court focused on the problems of a company strapped with $6.6 billion in pension costs. But the court's solution is one that even healthy firms are seeking to copy in one fashion or another, shifting benefit costs away from themselves and making fewer promises to their employees.

"People like to think of employers as social welfare organizations, but they're not," said Sylvester Scheiber, a partner with the financial consulting firm of Watson-Wyatt and a member of President Bush's 2001 Social Security Commission. "In an increasingly competitive world, they don't have room to do much else but focus on the competition."

Most U.S. companies have accomplished by other means much of what United Airlines did by defaulting on its pension obligations.

Employers of almost 30% of the nation's private sector workforce no longer offer the kind of pension where responsibility for managing retirement money and delivering benefits rests with the company. Instead, these firms make contributions to employees' retirement savings, perhaps through tax-deferred 401(k) accounts, but it's up to individuals to manage the money and suffer the shortfalls if any occur.

Employers of half of the workforce offer no retirement help whatsoever. The remaining 20% of workers are enrolled in traditional pensions, a percentage that has fallen by half in the last 25 years, according to Labor Department statistics and estimates by Boston College's Center for Retirement Research.

Many firms have begun to beat a similar retreat from employer-provided healthcare insurance.

The number of big company employees (those with 200 or more workers) in line for retiree health benefits has plunged from 66% in 1988 to 36% last year, according to the Kaiser Family Foundation, a nonpartisan health research group in Menlo Park, Calif. With health insurance rates for current employees posting double-digit jumps, employers have shaved an estimated 5 million workers from their insured rolls since 2001. And they have passed along many of the recent cost increases by nearly doubling the amount -- to $222 a month -- that employees must kick in for a typical family plan, according to Kaiser.