Back in 1973, I took a year off after graduating from high school to work in downtown Chicago. The human resources person reeled off the benefits at the title insurance company where I was hired as a clerk typist. "And we have a pension plan," she said. My eyes glazed over and I remember thinking, "Oh sure, I'm concerned about getting a pension right now."
It would be the only time I received such an offer.
Today, you'd be lucky to find a pension plan in the private sector, even if you apply at a huge multinational firm. New hires are more often getting shunted to an account-based plan such as a 401(k) these days, even if a pension plan is already in place at their new company. According to a new study released by employee-benefits consulting firm Towers Watson, among Fortune 100 companies, only 17 offer new employees a traditional pension plan -- one with payouts based on a formula that takes into consideration salary and tenure.
A quarter of the firms offer a "hybrid" plan such as a cash-balance plan, which is generally funded exclusively by the company. The advantage to workers: You're not trapped into working at the firm for decades to reap the benefits. When you escape, you can take the funds with you if you're vested.
The majority of Fortune 100 firms -- 58 of them -- offer defined contribution plans like 401(k)s as the only option to new hires. In 1985, 90 of the Fortune 100 offered defined benefit pension plans while 10 had account-based plans. Times have changed.
Work for the government?
I've always joked that I'd like to find a government job so I can get a pension. But many government plans, including Social Security, face funding problems. New Jersey recently curtailed some benefits in its public pension plan to address its $46 billion shortfall. Part-time workers are no longer eligible for benefits, and a 9 percent pension benefit increase granted in 2001 has been rolled back.
Funding shortfalls in Maryland's public plans prompted talk in recent months of shifting the liabilities of teacher pension payments to local governments, though that plan was tabled. Instead, the state is setting up an independent commission to study the state's public pension liabilities.
And future teachers and government workers in Illinois will have to wait until age 67 to retire with full benefits. The formula for figuring out payments will be based on an eight-year salary average rather than four years.
California's pension problems are probably the worst in the country, with an estimated shortfall of $536 billion, according to one study. That's partly because the three big public funds were overexposed to risky assets, an investment stance common among public plans.
Compared to public pension plans, private plans are doing well because they're subject to higher funding standards (although don't get me wrong -- some of those are in trouble, too). But as you can see, private plans are quickly receding from the landscape.