From The Associated Press, 6/22/05:
http://feeds.bignewsnetwork.com/redir.php?jid=093c4ac6ff5f716c&cat=3a8a80d6f705f8cc

Study: More Companies Terminate Pensions

By ADAM GELLER
AP Business Writer

NEW YORK (AP) --

Big employers sharply accelerated freezes and terminations of pension
plans last year, steering away from the increasing expense and
uncertainty of paying for workers' retirement, a new study says.

About 11 percent of the big companies offering traditional pensions
terminated their plans or froze accrual of new benefits to workers,
according to a study by consulting firm Watson Wyatt Worldwide,
released Wednesday.

That is up from 2003, when 7 percent of the nation's 1,000 largest
companies capped pension plans.

That trend, long in the making, has continued into this year, most
notably with UAL Corp.'s United Airlines defaulting on its severely
underfunded pension plans.

Whether it continues could hinge on how lawmakers resolve a number of
difficult questions swirling around pensions, experts say.

About half of the companies that froze pension accruals or terminated
plans last year are financially troubled businesses, the study found.

But even many healthy companies are rethinking pensions, partly
because of the uncertain legal status of some pension plans.

Many companies that, for years, were able to get by making minimal
contributions to their pension plans are now faced with massive
increases in required payments.

Congress is debating whether to jack up the premiums companies pay the
federal government to insure their pension plans.

That could lead even more companies to abandon pensions.

"The companies are operating in a world of uncertainty," said
Sylvester Schieber, director of U.S. benefits consulting at Watson
Wyatt.

"Big companies that continue to be viable, for the most part, have not
cut and run, although if we go on indefinitely with this uncertainty
they undoubtedly will."

Nearly two-thirds of the 1,000 largest U.S. companies still sponsor a
pension plan.

But last year 71 of those companies froze or terminated plans, up from
45 in 2003.

In a freeze, an employer leaves a plan in place, but current workers
cannot accrue any additional benefits.

In a termination, a company closes down a plan, defaulting to the
federal government or moving pension funds into an insurance policy
that will eventually pay out to workers.

Many pension plans were squeezed in the early part of this decade by
plummeting stock prices that cut sharply into investment returns.

At the same time, record low interest rates, which companies use to
determine how much they need to set aside to satisfy eventual pension
payouts, drove up the amount needed to satisfy those future costs.

The stock market has recovered considerably.

But pension plans remain under pressure, partly because administrators
spread the cost of the market downturn out over five years, experts
said.

At the same time, many companies are faced with paying substantial
amounts into pension plans after years of minimal costs.

During the 1980s and 1990s, investment returns and laws limiting
contributions meant many companies could put off funding the future
retirement of their workers.

"I think CEOs and CFOs (chief financial officers) started to suddenly
realize there's actually a dollar value to these promises we've been
making," said Jack VanDerhei, a professor at Temple University and
fellow at the nonpartisan Employee Benefits Research Institute.

"They're getting to a point where, if we (companies) want to go
forward, it's going to cost us money."

Companies are also doubtful about Congress' slowness to clear up
uncertainty over a type of pension known as cash balance plans, which
have been criticized as unfairly discriminating against older workers.

Lawmakers also are debating changes in pension funding rules, and
premium companies pay to the financially strapped Pension Benefit
Guaranty Corporation, the government agency that insures pensions.

In addition to United, the PBGC this year has taken over pensions
covering US Airways Group Inc. flight attendants and machinists.

Companies including Sears Holding Co., NCR Corp., Circuit Stores Inc.,
and others have frozen pension plans for all or some of their
employees during the past year.

__________________________________________________________

Don't worry. If you're a CEO you'll get yours. Or should I say, a CEO
will get yours.

Harry