Pensions back in black, but fewer in number

The nation's 100 largest corporate pension plans are the healthiest they've been in years. They had a $37.5 billion surplus as of year's end based on projected benefit payouts, according to a recent study by Pensions & Investments, a trade publication.

All but four plans strengthened. The stock market's big gain last year — the broad Russell 3000 index rose 16 percent — played a key role.

This is good news for workers fortunate enough to have defined-benefit plans, as pensions are also known. But their numbers are dwindling as corporations freeze pensions to new employees.

The number of pension plans covering more than 100 employees fell by 43 percent between 1990 and 2004, while the number of defined-contribution plans such as 401(k) plans grew by 75 percent, according to a study by Boston College's Center for Retirement Research.

Companies that offer pensions must invest well enough to provide guaranteed income to employees once they retire. Many companies have switched to 401(k) plans, shifting that responsibility to their employees.

Pension liabilities have become major burdens to troubled industries, such as airlines. But a well-managed plan can serve as a valuable incentive to employees.

Steven Foresti, a consultant at Wilshire Associates, thinks pensions could soon regain favor. "We believe the defined-benefit system is an important part of retirement security for American workers," he says. "It's also advantageous to plan sponsors when plans are run properly and money is set aside."