Post by unlawflcombatnt on Aug 13, 2007 13:43:57 GMT -6
from the Chicago Tribune:
More employers freezing, closing pension plans
By Peter G. Gosselin, a staff reporter for the Los Angeles Times, a Tribune Co. newspaper
8/12/07
"Roughly two-thirds of employers that offer traditional pensions have closed their plans to new hires or frozen them for all employees, or plan to do so in the next two years, according to a recent study.
The latest numbers show an acceleration in the decline of pensions -- retirement plans in which employers, instead of employees, are responsible for investing retirement money and providing benefits. They also illustrate that the trend is no longer confined to troubled industries such as steel, auto and airlines, but now involves healthy companies.
Analysts have known for some time that the number of employers shutting or freezing their pension plans was on the rise. But the sharp increase caught some by surprise....
The survey by the industry-supported Employee Benefit Research Institute and Mercer Human Resources Consulting shows most companies that close off their pensions seek to partially offset the loss to employees by increasing contributions to firm-sponsored 401(k)'s, where employees are responsible for managing their own retirement money.
But critics say the increases do not make up for the demise of pensions.
The benefits of 401(k)'s "are not measuring up," said David Certner, legislative policy director for AARP, the giant services and lobbying organization for senior citizens. "There are a lot more ways people can get tripped up with 401(k)'s than with traditional pensions."....
During the booming 1990s, a rising stock market raised the value of plans' investments so much that collectively the plans had to contribute only about $30 billion a year to ensure they could meet their obligations to future retirees.
But in 2000, two things happened: The stock market crashed, slashing the value of investments, and interest rates sank. Declining interest rates reduced the return on their investments, forcing the plans to set aside more funds to meet future benefit obligations.
The combination raised the amount that plans collectively had to set aside to about $90 billion a year and dramatically increased the number of plans that were considered "underfunded" and unable to meet their future obligations.
But the number of underfunded plans has come down in the last four years and, by some measures, the pension system as a whole is back in financial balance, analysts said.
One of the key items that has pushed employers to get out from under their pension plans is a new law, the Pension Protection Act, designed to stabilize the pension system.
Many employers queried by EBRI and Mercer cited the law in explaining their decisions...."
The entire article can be found at
More employers freezing, closing pension plans
More employers freezing, closing pension plans
By Peter G. Gosselin, a staff reporter for the Los Angeles Times, a Tribune Co. newspaper
8/12/07
"Roughly two-thirds of employers that offer traditional pensions have closed their plans to new hires or frozen them for all employees, or plan to do so in the next two years, according to a recent study.
The latest numbers show an acceleration in the decline of pensions -- retirement plans in which employers, instead of employees, are responsible for investing retirement money and providing benefits. They also illustrate that the trend is no longer confined to troubled industries such as steel, auto and airlines, but now involves healthy companies.
Analysts have known for some time that the number of employers shutting or freezing their pension plans was on the rise. But the sharp increase caught some by surprise....
The survey by the industry-supported Employee Benefit Research Institute and Mercer Human Resources Consulting shows most companies that close off their pensions seek to partially offset the loss to employees by increasing contributions to firm-sponsored 401(k)'s, where employees are responsible for managing their own retirement money.
But critics say the increases do not make up for the demise of pensions.
The benefits of 401(k)'s "are not measuring up," said David Certner, legislative policy director for AARP, the giant services and lobbying organization for senior citizens. "There are a lot more ways people can get tripped up with 401(k)'s than with traditional pensions."....
During the booming 1990s, a rising stock market raised the value of plans' investments so much that collectively the plans had to contribute only about $30 billion a year to ensure they could meet their obligations to future retirees.
But in 2000, two things happened: The stock market crashed, slashing the value of investments, and interest rates sank. Declining interest rates reduced the return on their investments, forcing the plans to set aside more funds to meet future benefit obligations.
The combination raised the amount that plans collectively had to set aside to about $90 billion a year and dramatically increased the number of plans that were considered "underfunded" and unable to meet their future obligations.
But the number of underfunded plans has come down in the last four years and, by some measures, the pension system as a whole is back in financial balance, analysts said.
One of the key items that has pushed employers to get out from under their pension plans is a new law, the Pension Protection Act, designed to stabilize the pension system.
Many employers queried by EBRI and Mercer cited the law in explaining their decisions...."
The entire article can be found at
More employers freezing, closing pension plans