Traditional Pensions Come under Pressure

• Published in: Knight Ridder Tribune Business News p. 1
• Main Author: Veverka, Amber
• Format: Newsletter
• Language: English
• Published: Washington Tribune Content Agency LLC 11.01.2004
• Subjects: Defined benefit plans; Employers; Interest rates; Investments; Pension plans

If more employers do stop offering pension plans, as the Hewitt study suggests, workers will be affected. While 401(k) plans, into which workers contribute their own money, allow employees to do their own investing, generally in mutual funds, pension plans offer the security of a guaranteed return. By contrast, corporate bond rates -- the ones many employers want Congress to let them use in calculating their pension contributions - - currently range 5.7 to 5.9 percent, said Howard Silverblatt, market equity analyst with Standard & Poor's. By assuming pension assets will grow at a higher rate, employers would not have to set aside as much cash. Labor groups such as the AFL-CIO describe pension plans as "under attack" and have urged support for government policies that safeguard them. Unions also are concerned about employers' move toward cash-balance plans, which are pension programs that tend to benefit younger workers at the expense of older ones. Congress has moved to restrict the plans over concerns that they are age discriminatory, another issue employers said they want revisited.