Article: The Pension Deep Freeze (the topic America fails to address)

"As a society, we have proved unwilling to deal in any comprehensive way with the looming retirement crisis that is likely to occur in the years when the baby boom generation leaves the workplace."

New York Times Editorial, January 14, 2006

In the past, the public dialogue about Corporate America's move away from traditional pensions for retirees centered on struggling industries - steel, airlines - that had dumped their pension obligations on the federal government. But the announcement last week that the financially healthy technology giant I.B.M. will freeze its pension system reiterates the message businesses are increasingly sending their employees: you're on your own.

By all accounts, I.B.M. has an excellent 401(k) plan as an alternative to pensions. The plan includes automatic company contributions to employee accounts, which means that even those workers who decide not to set aside any part of their own salaries will have something to fall back on. The company will also match employee contributions up to a level as high as 6 percent of an individual's pay, depending on when the person was hired.

Considering that most plans give no more than 50 cents on the dollar in matching donations, that's very generous by today's standards. But today's standards are the problem. Even a good 401(k) doesn't offer the safety of most old-fashioned pensions, which pay out a guaranteed set of benefits to retirees.

A safe retirement based on a 401(k) account requires decades of discipline, something many people don't have. A recent study by Hewitt Associates, the employee benefits research firm, found that 45 percent of workers cashed out their 401(k)'s when leaving a company, instead of leaving the money in the plan or rolling it over into a new one. And some workers cannot or do not participate in the retirement plans available to them.

As a society, we have proved unwilling to deal in any comprehensive way with the looming retirement crisis that is likely to occur in the years when the baby boom generation leaves the workplace. The deal between workers and businesses is breaking down, and there is nothing to take its place. It is incumbent on our elected leaders, along with business and labor leaders, to confront this issue now. Poor investment decisions or a market downturn as an employee is entering retirement and needs to draw on the funds can be the difference between a secure retirement and an old age spent in poverty.