Court approval of UAL Corp.'s decision to terminate its employee pension plans has put the spotlight on these traditional retirement programs...

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NEW YORK — Court approval of UAL Corp.’s decision to terminate its employee pension plans has put the spotlight on these traditional retirement programs. Here are questions and answers about these defined-benefit plans.

Q:
How many workers are covered by pension plans?

A:
For the past 15 years, there’s been a steady decline in the number of defined-benefit plans, which companies fund to provide workers with a lump-sum benefit at retirement or a fixed monthly income for life. At the same time, there’s been a rise in defined-contribution plans, such as 401(k) accounts, which require workers to save for their own retirement. Many companies provide a matching contribution to these accounts.

According to the Department of Labor, half of workers in the private sector have neither defined-benefit nor defined-contribution plans. About 7 percent have only traditional pensions, while 29 percent have only defined-contribution plans. Some 14 percent have both defined-benefit and defined-contribution plans.

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Q:
Is my pension secure?

A:
“Overall, the majority of people are getting their pensions from the company where they worked — or from the company that bought the company they worked for,” said Craig Copeland, senior research associate at the nonprofit Employee Benefit Research Institute in Washington, D.C.

In addition, the defined-benefit pension plans of private-sector companies are insured by a federal agency, the Pension Benefit Guaranty Corp., he pointed out. Companies must be in extreme financial distress before they can terminate pension plans and turn them over to the PBGC to administer.

Q:
If the PBGC can step in, why should workers worry?

A:
Highly paid workers, like pilots, are most concerned because the PBGC has a cap on the amount it will pay a retiree. For 2005, a worker retiring at age 65 can draw a maximum of $3,801.14 a month, or about $45,614 a year. Some workers at United and other companies with failed pension programs had expected much more than that.

“For those under the PBGC maximum, they don’t have any worries about the pension they’ve accrued,” said William Arnone, a partner in the human capital practice at Ernst & Young in New York. But workers with higher salaries and more seniority “are going to have less future retirement security if their plan is frozen or terminated.”

People who already have retired may see their benefits cut if they exceed the PBGC maximums, he said.

Q:
Could United’s problems be a harbinger of more to come?

A:
Patrick Purcell, a pension expert at the Congressional Research Service in Washington, D.C., said that many experts believe “defined-benefit plans are in a long-term death spiral” because they are so costly to maintain as Americans live longer.

“One question is: Is the decision at United going to force American Airlines or Northwest or Continental to say, ‘The only way we can compete is to shed some of these pension costs’?” Purcell said. “In a worst-case scenario, some will decide that’s the case.”

On the other hand, the airline industry — as well as the troubled U.S. auto industry — are heavily unionized. “That means it’s less likely pension plans will be terminated quickly, because they are part of collectively bargained benefits,” he said.

Q:
What about government employees?

A:
State and local governments generally have provided their workers with defined-benefit plans, which are funded with tax revenue. Aware of how expensive they are to maintain, some states — including California — have been looking at offering defined-contribution plans.

The federal government offers workers both defined-benefit and defined-contribution plans.

Q:
Is there anything a worker can do to protect his or her retirement nest egg?

A:
Robert Carlson, a retirement adviser in Annandale, Va., who is the author of “The New Rules of Retirement — Strategies for a Secure Future,” said that people are going to have to depend more on their own savings.

“Prior generations believed that their employer would take care of them, giving them an adequate pension plan. But we’ve learned they really can’t afford to keep those promises,” he said. “So you have to understand that most of your retirement financing is going to have to come from your savings and your investment returns.”

Q:
Are there specific steps older workers should take?

A:
Carlson pointed out that most young workers are in defined-contribution plans and have years ahead of them to save, but older workers may be nearing the time they planned to retire.

That makes it especially important for older workers to monitor their employer’s financial situation to determine whether the company can make good on its promises, he said.

If the employer looks shaky, “maybe you should be looking for another job or pulling out money from your pension plan to preserve what you’ve already got,” Carlson said. Many older workers, he added, “may find themselves working longer or adjusting their lifestyles to accommodate lower [retirement] income.”