The Government Accountability Office warns in a new study that the long-term stability of traditional, defined benefit pension plans "is now vulnerable to the broader trends of eroding retirement security."
Millions of Americans still rely on the plans, which offer lifetime retirement benefits based on an employee's years of service with a company. But the GAO study found more than 80 percent of the companies it surveyed had already modified their pension plans, usually because of market pressures, and that was before the financial crisis began last fall.
The study warns, "The current market turmoil appears likely to exacerbate this trend." The study found employers have been freezing their pension plans, modifying the benefit formulas, or in some cases, eliminating the plans altogether. Only 29,000 U.S. companies offer defined benefit pension plans today, compared to 92,000 companies in 1990.
For years, employers have been moving away from traditional pension plans, in favor of less secure, "defined contribution" 401(k) plans. But those plans have been hit hard by the market turmoil as well, leaving millions of Americans in a retirement squeeze.
The GAO concludes in its study that "it may be time for policymakers to consider alternative models for retirement security."