NEW YORK — Corporate pension plans aren’t what they used to be.

In recent years, much of corporate America has moved away from defined benefit plans, an emblem of job security from a previous era in which pensions are calculated on formulas based on a worker’s tenure and wages over a period of time. The new model is a defined contribution or a 401(k) plan.

The popularity of 401(k)s with big business is easy to understand. Workers save money for their own retirement in a tax-deferred account. Some companies have a provision in which the employer matches a specific amount that the employee contributes. The money goes into a company pool and is invested in stocks, bonds or other financial alternatives.

At a time when the retail industry, along with a cross-section of businesses, is concerned with the rising costs of health benefits, experts said the recent freeze of pension plans by Verizon and IBM may encourage others to follow. In this scenario, current employees will accrue no more benefits and future workers will receive none. As an alternative, companies may make greater contributions to 401(k) accounts.

Last month, General Motors said it would freeze its pension program and this month announce a new strategy for worker retirement as part of its effort to return to profitability. The troubled car company also plans to eliminate 30,000 hourly jobs and close 12 facilities by 2008.

The Coalition for Retirement Security of the Pension Rights Center has sounded an alarm on behalf of workers: “In recent years, hundreds of large companies have broken long-standing pension and health insurance promises to their loyal, longtime employees and retirees,’’ according to a statement on the group’s Web site. “These unfair practices are accelerating rather than diminishing, and are undercutting the retirement security of millions of people.”

While curbing health care costs has been a priority for U.S. retailers, many are also looking for ways to lower the costs of administering pensions, as well as eliminating them. Switching from a defined benefits plan to a 401(k) presents challenges for employees who have to decide how to invest their money and take responsibility for those decisions.

This story first appeared in the March 6, 2006 issue of WWD. Subscribe Today.

“Our research shows the defined benefits plans are not a common offering for retailers,’’ said Rob Green, vice president, government and political affairs, at the National Retail Federation in Washington. “There are more companies offering defined contribution programs.”

Changes in the workforce are among the many factors responsible for the shift away from traditional pension plans, Green said. “Workers are being more mobile and holding a greater number of jobs during their careers,” he explained. “The value of a defined benefits plan provides a better model for a worker who is staying with one company. They’re more expensive to maintain and have more administrative costs.

“The employee has more control over the 401(k) and it’s more portable,” Green said. “You can be more competitive if you’re able to match [an employee’s contributions]. If a company has a younger workforce, in some cases the employees don’t even take advantage of the plan. The bottom line is that retailers view their employees as their biggest resource. The challenge is to make a benefits package as robust as it can be.”

Sears Holdings, the company formed when Sears, Roebuck acquired Kmart, announced in April 2005 that it would no longer make contributions to its defined pension fund. A 401(k) in effect at the time was redesigned to include two matching components, one in which the company matches employee contributions dollar for dollar.

“As many American companies have found, pension plans have become unaffordable,” said a spokesman for Sears Holdings. “They cause significant volatility to earnings. It’s becoming more and more a reality in retail and other industries, as well. We announced three years ago that for a segment of the population — those under 40 years old and those who joined the company after 2005 — we would no longer be making contributions.”

At the time the changes were made, Sears Holding chairman Edward Lampert said, “Many of our retail competitors have much lower cost structures that allow them to run different business models that are valued by both employees and customers alike.”

Kmart had no pension plan when it was taken over by Sears, the spokesman said. Kmart workers lost millions in retirement savings when the company filed for bankruptcy in January 2002 and Kmart stock tanked.

A federal judge last month gave preliminary approval to a settlement deal in which 71,000 current and former Kmart employees will get about 18 percent of what they lost on the Kmart stock in their 401(k) plans. A 2002 lawsuit argued that Kmart executives had a fiduciary duty to sell the stock in the plans, but didn’t do so until weeks after the bankruptcy filing.

A spokesman for Wal-Mart, the Bentonville, Ark., retail giant, said the company offers associates a combined profit-sharing-401(k) plan; the retailer contributes 4 percent of an eligible associate’s yearly salary, whether or not the associate makes contributions. The plan is available to full- and part-time employees, he added. It is structured so that half the money goes into profit-sharing and half into the 401(k). An employee becomes fully vested for the profit-sharing portion after seven years. The 401(k) is available immediately.

“The plan is not under review,” the spokesman said. “We believe it’s competitive. It’s something we’re able to provide our associates to provide long-term security. Certainly, it’s something that’s of importance to people you’re trying to recruit into the company. It’s one of many benefits. We have a whole host of benefit options they can select from, including a stock purchase plan, and our discount card is very popular.”

According to statistics from the U.S. Employee Benefits Security Administration, defined benefits plans have never been popular in the retail industry. An EBSA report published last month said there were 2,052 defined benefit plans and 50,409 401(k) plans in the retail sector in 2001, the most recent year for which data is available. By comparison, there were 3,109 defined benefit plans and 52,642 defined contribution plans in 1995.

Hal Reiter, ceo of executive search firm Herbert Mines Associates, said the lack of defined benefit pension plans has not been an issue in his experience.

“They incent people with stock options, salary and bonus,” he said of how businesses seek to lure top executives. “Private retailers have equity in the private stock, which would be recognized upon liquidation.

“I’ve never placed someone who said, ‘I have a big problem because a certain company doesn’t have a pension plan,’” Reiter said. “If you’re pulling a big person out of a big company with a pension plan they’re going to want to have it replaced with something else.”

Watson Wyatt Worldwide, a consulting firm specializing in human resources and management, found that defined benefit plans are as important in convincing younger workers to take a job as 401(k) plans.

Neiman Marcus has defined benefit and defined contribution plans, available to employees as soon as they meet eligibility requirements. “We’re continually reviewing the effectiveness of this as a tool for both attracting and retaining employees,” a spokeswoman said.

Federated Department Stores, with both defined benefits and 401(k) plans, assumed responsibility for May Co.’s pension program after acquiring the retailer on Aug. 30. Workers at stores Filene’s and Foley’s, which will be changed over to Macy’s formats, continue to receive benefits under the May plan.

A spokeswoman said she didn’t know whether the employees would be switched to a Federated plan. “Federated believes in offering its employees a competitive package of compensation and benefits,” she said, adding, “There’s been no discussion of trying to move away from defined benefits.”

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