Pensions at Risk

Physician's Money Digest, September30 2003, Volume 10, Issue 18

The traditional defined-compensationpension offered by many corporationshas been slowly giving way todefined-contribution plans like 401(k)accounts. The traditional pension isoften a cash-hungry program, which hasled some companies to switch to "cashvalue"pensions in an effort to cut costs.This newer version tends to cut pensions,especially for long-term workers,which has led to an age-discriminationsuit against IBM. One of the first to goto a cash-value plan, the business-equipmentgiant has lost a round in federalcourt, which has some pension expertsworried that cash-value plans maybecome illegal. If that happens, manylarge companies that no longer have theoption of switching to lower-cost pensionprograms may dump their pensionplans entirely, leaving only 401(k) plans,where the employee puts up most of themoney and assumes all the risk.