Make 'em Provide Pensions

The long-predicted ice age is settling in on America's private pension system, as companies large and small, profitable and unprofitable, announce the freezing of their traditional plans, the kind that once promised a lifetime income for retirees.

Freezes have been announced recently at firms ranging from International Business Machines Corp. to communications giants Verizon Communications Inc. and Sprint Nextel Corp. to athletic clothing maker Russell Corp. to textile firm Milliken & Co. to struggling Northwest Airlines Corp. They join a number of bankrupt steel and airline companies, including United Airlines and Bethlehem Steel Corp., that have turned, or are seeking to turn, their pension plans over to the Pension Benefit Guaranty Corp., the government agency that insures traditional "defined benefit" pensions.

The joining of the parade by a growing number of companies that appear solid and profitable and that do not argue that the future of the firm is at stake suggests that a tipping point has been reached. This comes as Congress winds up two more years of dithering about how to "save" the private system.

Perhaps it is time to change the terms of the debate -- something that will happen only if the nation's workers insist on it and do so at the ballot box.

Until now, much of the debate over what to do about pensions has taken as a first principle that the system is voluntary. If you accept that, then it follows that doing too much tightening will simply cause companies to drop their plans.

That principle needs reexamining.

One of the key reasons that companies such as IBM and United are getting out of the pension business is that they are competing with companies that never were in it. Newer entrants in their industries, such as Microsoft Corp. and JetBlue Airways Corp., have only "defined contribution" plans, such as 401(k)s, that involve no promises to workers and leave the workers with the investment risk.

When United and other airlines were filing for bankruptcy protection, it was common to hear them accused of "dumping their pension on the government" to get a competitive advantage. That was backward, of course. It was the other guys who had the competitive advantage, and the faltering airlines needed to "level the playing field."

But playing fields can be leveled two ways, one of which is up, and if we are to continue to have a pension system at all -- I don't regard 401(k) plans as pensions, but merely savings devices -- it's time for policymakers and voters to think about making companies go that direction.

Today the idea of requiring employers to provide pensions is dismissed out of hand in the United States, but that isn't the case everywhere. Last month, lawmakers in Norway approved a measure that requires all employers in the country to set up and fund retirement plans for their workers.

The law allows either defined benefit or defined contribution plans, but according to an analysis by consultants Towers Perrin, the law sets minimum contribution levels by employers that choose defined contribution plans and specifies that if a defined benefit plan is chosen, its benefits must be at least equivalent to that.

Think about it. In this country, only about half of all workers have any employer-sponsored retirement plan at all, and the only income of about 20 percent of retirees comes from Social Security.