The move to freeze pensions at solid, profitable companies like Verizon—and at others, including IBM, Sprint, Nextel, Tribune Corp., Lexmark, Alcoa and Russell Corp.—is the latest sign of pressure on traditional guaranteed pension plans. "It's an entirely new phenomenon for healthy companies to freeze their pensions," says Alicia Munnell, director of the Center for Retirement Research at Boston College.
In 2003, 41 percent of workers with pension coverage had defined benefit pensions, down from 83 percent in 1980, according to the latest data released in February by the center. For the last several years, employees in struggling industries such as airlines, steel, coal and textiles have watched as their firms declared bankruptcy and terminated their plans altogether. And more may be in trouble, particularly in industries such as auto parts.
Not only that, new regulatory and legislative changes now in the works could encourage companies to freeze their pensions—or get out of the pension business altogether. And questions are being raised about the funding of pensions for public-sector employees.
Yeah, about those public sector pensions...
Treasury Secretary John Snow notified Congress yesterday that the administration had taken "all prudent and legal actions," including tapping certain government retirement funds, to keep from hitting the $8.2 trillion national-debt limit.