No news is good as sponsors struggle.

• Author: Marshall, Jeffrey
• Position: Pensions

The news from the traditional defined-benefit (DB) pension front seems to get progressively gloomier. In March, corporate leviathan General Motors Corp. announced that it, too, would freeze pension plans for its white-collar workers. Beginning next January 1, it will freeze accrued pension benefits for some 42,000 managers under the existing defined-benefit plan and begin a shift to defined-contribution (DC) plans, such as 401(k)s. GM said it expects the move to trim its pension liability by $1.6 billion this year, and create pension savings of $420 million next year.

Expect more such announcements, as traditional pension managers decide to freeze existing plans and transition toward DC programs, says Hugh Bromma, CEO of Entrust Corp., a retirement plan administrator that specializes in self-directed IRAs and 401(k)s. Bromma says that based on what he's seeing and hearing, two-thirds of existing DB plans could be frozen or eliminated within 10 years.

The economy is in transition, he notes, and the old ways simply don't work: whole industries, like the airlines and big automakers, are in distress and are seeking relief from their obligations to workers. Eventually, many of those plan sponsors will turn to the Pension Benefit Guaranty Corp. (PBGC) for protection.

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