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Nowadays, pensions are taking a beating

SHARE Nowadays, pensions are taking a beating

During the stock-market heyday of the 1990s, workers were too caught up in watching their surging 401(k) returns to take much notice of traditional pension plans, which promise a fixed retirement benefit based on salary history and years of service. At the same time, booming investment returns meant that employers who offered such plans didn't need to add to their pension reserves — a boon to corporate earnings.

That was then. Now it's 2003, and just when workers are coming to appreciate the security and stability of defined-benefit plans, employers may be less inclined to offer them. Each month a smaller percentage of pension plans are fully funded, says Jim Jaffe of the Employee Benefit Research Institute.

A combination of the stock-market collapse and low interest rates will require companies to put aside more money to fund their retirement liabilities. In a survey by Pensions & Investments, a trade publication, 21 major corporations said they will have to come up with a total of $32 billion over the next few years. If investment returns don't move firmly into positive territory soon, "the pain is just going to get worse," says retirement consultant Ted Benna.