World trade pact will affect future benefits.

For millions of future American retirees, the GATT world-trade agreement brings both good news and bad news, according to the Institute of Certified Financial Planners. The good news is that the Retirement Protection Act, passed by Congress as part of the enactment legislation for the General Agreement on Trade and Tariffs, includes several provisions intended to make pension funds safer. Among them is the required use of a longer, standardized mortality table. When a company funds its pension plan, it must make actuarial assumptions as to how long its retirees will live--and, hence, how much money it needs to put aside to pay for their lifetime retirement benefits. Many plans have assumed shorter lifespans than the Federal mortality table, thus requiring less money to be set aside. The new table forces them to put more money into their plans.

The act also requires underfunded company pension plans to pay higher insurance premiums to the Pension Benefit Guaranty Corporation (PBGC). This Federal agency steps in to pay benefits to retirees whose company pension plan has failed. The PBGC estimates that 8,000,000 Americans work for companies whose plans are underfunded by a total of $71,000,000,000. The PBGC itself is nearly $3,000,000,000 in the hole after bailing out nearly 2,000 pension plans since the agency was created in 1974.

The bad news is the GATT legislation reduces the benefits for some retirees to help pay for the loss of tariff revenue under the new trade pact. One move is to freeze for at least a year the increase in the maximum contribution limit of 401(k) plans, which adjusts annually with inflation. Moreover, future increases will be able to rise only in minimum increments of $500. As a result, some workers will be able to contribute fewer...