Traditional pension is in danger of dying off

Attractive corporate plans now cover just 20 percent of U.S. work force

April 08, 2002|By Liz Pulliam Weston | Liz Pulliam Weston,SPECIAL TO THE SUN

The traditional corporate pension, which gives workers a guaranteed paycheck in retirement, has rarely looked more attractive - or been more endangered.

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, 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 other employers from starting plans.

In 1975, 43 percent of corporate employees were covered by a traditional pension, according to the Employee Benefit Research Institute. By 2000, that proportion had dropped to 20 percent.

Unlike 401(k)s, in which workers invest their own money (often with some match from the company), traditional pensions are financed by the employer, who is required to make up any shortfalls.

Liz Pulliam Weston is a reporter for the Los Angeles Times, a Tribune Publishing newspaper.

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