The article points to companies like IBM, Hewlitt-Packard,
Verizon, and Circuit City, all companies that have recently frozen
their pension plans. That means existing workers will get
something, but nowhere near what they expected to receive upon
retirement. New workers will not be eligible for any sort of pension
plan. Some companies, like United Airlines, have eliminated the
pension plans of existing workers who will, therefore, receive nothing
upon retirement.
This trend reflects the change as to how employers are viewing their
responsibility towards providing retirement income. "Companies
are making the shift from pension plans to 401(k) to shift the
financial burden of the employees’ retirement to the employee and
reduce significantly the future financial obligations of the
corporation," said Perry Greenfield, of Wachovia Securities.
The article notes that so many plans have been eliminated that just 6
percent of workers are in pension programs today, while 30 percent are
offered a 401(k).
The article stresses that many workers will now have to rely on the
government's backup plan -- the Pension Benefit Guaranty Corp. This
plan doesn’t always cover the losses, however. The article states
that with 1.3 million workers already on their rolls, PBCG is paying
out far more than companies contribute to them.
"We currently have a deficit of about $23 billion and that has grown
substantially over the last four to five years. Then we had a $10
billion surplus," says Bradley Belt, executive director of the Pension
Benefit Guaranty Corp.
Wachovia’s Perry Greenfield notes that employees now need to begin
taking care of themselves. If you’re company has a 401(k) plan,
he says, join it now. "The axiom is, 'Pay yourself first.' By
that I mean contribute to the 401(k) plan," Greenfield said. "The most
you can put in in 2006 is $15,000. If you're over the age of 50, that
number jumps up to $20,000." If your company offers nothing, he
stresses, it’s time to open an IRA.
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