Next Recession Victim: Your Pension and Retirement Plan

Peter Austin, executive director of Bank of New York Mellon Pension Services, said that many companies are forced to make higher contributions because the value of their pension portfolios plunged. To make matters worse, a lot of companies can't borrow cash to add to the fund because of the credit crisis.

"It's probably the perfect storm for these pension plans," Austin said.

Austin said many of his corporate clients are now considering other options, including freezing their plans. Many are switching over to a defined contribution plan, such as a 401(k) instead of a pension.

But he cautioned that while bankruptcy is never a good thing, "the sky's not falling." He said the plans are set up in a way that even if a company collapses, workers are safe from losses.

"Even in the worst case of bankruptcy," he said, "their benefits will be protected."

Olivia S. Mitchell, executive director of the Wharton School's Pension Research Council at the University of Pennsylvania, has been noticing a similar scaling back by companies.

She said roughly $2 trillion has been lost in 401(k)s and pension plans during the recession.

"Plan sponsors are going to have to start contributing more to back the promises they've already made," Mitchell said. "Corporate plan sponsors are looking very hard at whether they can reduce future benefit accruals."

Companies can't touch the benefits workers already received but nothing stops them from ending their pension plans in the immediate future.

Underfunded Plans

Newhouse Newspapers, for instance, is cutting pension contributions and shifting to a 401(k) program. Cell phone maker Motorola suspending its contributions in December.

Then there is a final group of companies, who have seen their funding drop so low that they are required by the federal Pension Protection Act of 2006 to make changes to their plans.

For instance, book publisher Houghton-Mifflin Harcourt notified its employees last week that they will no longer be able to take a lump-sum payment at retirement, according to spokesman Joe Blumenfeld. Employees instead will have to either take traditional monthly payments or can chose to get half of the lump-sum payment and the rest through monthly payments.

Blumenfeld said the plan fell below the 80 percent funding level and the company, by law, had no choice but to make the change.

"There wasn't a great uproar about it," he said, but many were asking: "Who has a defined pension anymore, anyway."

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