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Finding A Way Out Of The Pension Maze

"The Benefits Trap" (Cover Story, July 19) by Nanette Byrnes was outstanding. Few people understand the seriousness of the switch from defined-benefit to defined-contribution plans. This is clearly demonstrated by the declining, not increasing, national savings rates as well as record levels of personal debt. My personal feeling is that employers' pension trusts are probably in more trouble than the article implied. This is a consequence of employers assuming future returns of 8% and higher for trust portfolios that have a large bond component, especially if we have just a couple more years with mediocre stock performance.

Thanks to BusinessWeek for an article that warns of impending financial trouble instead of pandering to many in the financial industry and government who want us to believe that the future is bright and shining, so that we'll spend more and save less.

Henry K. Hebeler

Kent, Wash.

Editor's Note: The writer, former president and also chief forecaster for Boeing Co. (BA), runs a Web site,, that gives advice on financial planning for retirement.

I cannot understand why employees' deferred wages -- the pension plan -- is not considered a debt of the company and one that should take its place with other debts that the company owes. Bank A expects that its loan will be repaid and that if it has the senior debt that it will stand at the head of the line to reap whatever is left over in a bankruptcy. Why are the debts owed to employees different? The date for those obligations for pensions should go back to the start of the pension plan and would likely be the senior debt obligation for many companies.

Banks should have to stand in line behind the pension plan if they lent money after the start of the pension plan. This would require companies to keep up with their pension obligations in order to float more loans.

Timothy J. Dayton

Sault Ste. Marie, Mich.

Your article did not explore the more far-reaching initiatives that are undermining defined-benefit plans, discouraging Corporate America from maintaining this critical element of our national retirement strategy. The U.S. corporate pension system is facing a series of uncoordinated accounting, legislative, and regulatory proposals from the Financial Accounting Standard Board, ratings agencies, the Treasury Dept., and others, each being pursued in the name of improving or safeguarding the system.

The Committee on Investment of Employee Benefit Assets (CIEBA) surveyed its members and sponsored independent research, in which approximately 50% of the surveyed plan sponsors indicated that freezing plans for current or future employees was a possible or very likely response to the pending initiatives. Further, 75% of CIEBA members surveyed would make a significant change in their asset allocation, increasing pension costs and reducing benefits for millions of participants, if these initiatives are adopted. The repercussions would further negatively affect the stock market, employment rates, and the economy.

CIEBA is calling on America's legislators, regulators, and academics to develop a coordinated approach that ensures the long-term viability of defined-benefit plans while enhancing the overall system. This is a critical first step in developing a cohesive long-term national retirement system that addresses the 77 million baby boomers now beginning to approach retirement.

Gary A. Glynn, Chairman

Committee on Investment

of Employee Benefit Assets

New York

Editor's Note: CIEBA is a membership organization of the Association for Financial Professionals that represents more than 110 of the nation's largest pension funds. The writer is president of U.S. Steel (X)and Carnegie Pension Fund.

As you stated, health benefits, particularly retiree health benefits, are most at risk because there is no "safety net." There is a terrible irony in all this: Health insurance has too long been connected to employment. My father, Carroll Daugherty, was chairman of a Presidential board that in 1949 settled a long steel strike and pioneered health benefits for workers. That, at the time, was cheaper than giving pay increases.

James C. Daugherty

Bradenton, Fla.

The sooner labor leaders, union employees, and corporate leadership learn that "they must hang together or hang separately," the better off all of them will be.

Jack J. Crocker

Palm Desert, Calif.

Consider this major economic difference between the West and the East, with whom we now uncomfortably compete: We Westerners stress self-sufficiency, pushing our young out of our nests upon adulthood and assuming we will enjoy a life of ease as we turn gray. In Eastern developing countries, however, extended families often live together and pool their resources. It may be time to reconsider. Reconnecting the generations could solve a number of logistical, economic, and developmental problems. As a 43-year-old white-collar worker who is between careers and with virtually no retirement savings, it has occurred to me that I should make nice with my children now because we might need to enjoy a harmonious, long-lasting relationship from here on out.

Jennifer Kirley

Greene, Me.

According to your July 19 issue, the two biggest problems facing U.S. businesses are the costs of benefits (Cover Story) and the the huge amounts of excess cash from record profits ("Stuffed with dough," News: Analysis & Commentary). Many companies that are complaining they cannot compete because of benefits costs are sitting on huge sums -- IBM was mentioned prominently in both stories. As you pointed out, many companies imprudently did not make any contributions in the late 1990s, when pension funds got overfunded, but now are begging for relief when they are underfunded. If management, aided by government, would start living up to its responsibility to workers, the entire economy and country would be better off.

Michael D. Myers

Lutherville, Md.

"What Intel's (INTC) opponents are up to" (Technology & You, July 5) states: "The Athlon 64 can run existing 32-bit [Microsoft Corp. (MSFT)] Windows XP and applications, but they take a toll on performance." In fact, the Advanced Micro Devices Inc. (AMD)Athlon 64 FX processor runs 32-bit software faster than any other PC microprocessor today. AMD designed the AMD64 architecture to run both 32-bit and 64-bit applications side by side without any performance penalties. Multiple benchmarks prove that we succeeded.

Marty Seyer

Vice-President & General Manager

AMD Microprocessor Business Unit

Austin, Tex.

Editor's Note: Our statement referred to the chip's performance running 32-bit software relative to its performance running 64-bit software.

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