Pensions' Heavier Load
Kiplinger's Personal Finance (02/03) Vol. 57, No. 2 p.25; Francis, Theo

Workers who once clamored for 401(k)s during the stock market boom are now crying for defined-benefit plans when employers are hoping to phase them out to cancel out any liabilities and funding gaps. According to a Pensions & Investments survey, companies will have to infuse their pension plans with $32 billion over the next several years in order to close funding gaps and reduce their retirement savings liabilities. However, many companies are unwilling to provide their pension plans with more cash, especially in this weak economy. Experts agree that companies will either add profit-sharing options to 401(k) plans, convert traditional pensions into cash-balance plans, or eliminate plans for new employees. Center for Retirement Research Director Alicia Munnell says, "the ideal solution would be to combine the best of both worlds into a system in which employees could accumulate retirement wealth in a 401(k) plan early in their careers, and then switch into a cash-balance plan--shifting the burden back to employers."

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