Bottom-liners have convinced many businesses to end their pension programs and contribute instead to employees' retirement savings plans. Saves money, the argument goes. Others with a longer view contend that while the practice may be penny-wise in the short run, it will prove itself pound-foolish.
Overall labor costs will rise as the number of pensions fall off, especially those associated with staff turnovers, expected to be more frequent, what with no pension plan to hold people in place. Training new staff is expensive.
Pension benefits keep the best and the brightest on the job, the better to maximize benefits, typically based on salary and years of service, i.e. seniority.
Pensions also increase the number of sweeteners, like adding on years of service, for managers who want to cut back on high-end staff.
"In a 401(k) plan, there's no [pension] formula to manipulate," says William Arnone, a partner in Ernst & Young's human capital practice.
Thirty years ago there were about 100,000 pension plans in the private sector; today just 31,000 of them. Companies may like this picture; workers don't.
The past decade has been particularly harsh on their futures. A dozen years ago 42 percent of heads of households in retirement plans had a traditional pension, whereas in 2001, only 21 percent did. This suggests that aging employees will become less and less willing to retire. They won't be able to afford to do it.
DeLoitte Consulting surveyed 125 companies, among 52 percent that had changed their pension plans. Some 63 percent of them were trying to manage cost volatility, about the same number who said they wanted to save money.
If their trained investment professionals can't manage market volatility, how in the world do they, or government officials, expect individuals whose retirement savings are in 401(k) plans to do it effectively? It defies reason, too, to expect individuals to manage the risk of longevity. Savings planned for 77 years of life are often gone at 87. Pensions pool that risk.
Individual pension plans may have shrunk profits - surely some of this is due to allowed raids on the plans in days when they seemed overfunded - but the lack of them may, over time, have the same effect.
The 401(k) savings plans, while disciplining and worthy, are no substitute for the security most people need as they approach their "golden" years.