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The Charlotte Observer reported that Rick Priory's 1997 salary was 671,933 dollars. His bonus was 297,339 dollars, and his LTIP pay out was 397,013 dollars.

Jamal Kifafi is a simple man who lives a simple life.

Trained as a shopkeeper, the Jordanian immigrant works as a security guard and lives with his wife of 30 years in the modest Washington, D.C., apartment building where he works. Yet the affable 57-year-old is ensnared in a complicated legal battle that could affect how one of America's largest corporations calculates pension benefits for thousands of workers.

Kifafi, who is at the center of a class-action suit filed last month against Hilton Hotels Corp., charges that the hotel chain based in Beverly Hills, Calif., systematically miscalculates pension benefits in a way that leaves many current and former employees with less than half of the monthly benefits they're due. Moreover, a host of corporate policies may deter the hotel company's workers from claiming their pensions at all, the suit alleges.

CEOs Once Got Top Dollar Only for Top Results. Now Many Are Getting Top Dollar No Matter What.

Gilbert F. Amelio cried all the way to the bank.

During his 17-month tenure as head of Apple Computer Inc., the company racked up losses totaling nearly $2 billion. But when the board ousted him last summer, Mr. Amelio walked away with severance pay of $6.7 million, in addition to his $2 million in salary and bonus for the year ended Sept. 30. And Dr. Amelio vows to seek a still juicier deal in his next CEO job. Despite the severance windfall, he says the Apple package "didn't protect my downside as well as I had hoped it would."

Welcome aboard the Chief Executive Gravy Train. It overflows with treasure when things go well -- and even when they don't. Corporate boards see such unfettered largess simply as the price they must pay for luring and retaining executive talent amid a hot job market. For top corporate bosses, the message seems to be: No gain, little pain.

"You are definitely losing the linkage between pay and performance," says Carol Bowie, research director of Executive Compensation Advisory Services, a consulting firm in Springfield, Va. "There is no longer any risk financially to being a CEO."

Such "risk-free" compensation takes many forms besides sweet sayonara. CEOs get inflated signing awards and guaranteed first-year bonuses. Colossal grants of stock options and restricted shares. Midterm "retention" bonuses tied solely to longevity. Loans for share purchases that are insulated against plunging prices.

But add in the windfall from stock-option exercises, and there's really no comparison. Mercer's study found that 179 corporate chiefs cashed in options during 1997, up from 166 the previous year. And thanks to the protracted bull market, the median gain realized from these option deals reached an all-time high of $1,868,268, up from $1,256,936 in 1996.

Many boards no longer insist "that if you don't produce, you don't get paid," agrees Alan Johnson, managing director of New York pay consultants Johnson & Associates. Corporate chiefs hold greater leverage to say, " 'Show me the money' no matter what," Mr. Johnson says.

The most popular mechanism for lowering a chief executive's pay risk is the so-called megagrant. These grants consist of a stock option with a face value of more than three times the executive's salary and bonus, or a restricted-stock award with a face value of more than the cash compensation.

Either way, the executive has almost nothing to lose and plenty to gain. The restricted-share awards cost the recipient little or nothing, and their limitations usually disappear after three to five years. So even if the stock price falls, the CEO can still make money by selling the shares after a few years. A sizable-enough wad of options, meanwhile, produces plentiful profits from even a tiny advance in the share price.

Risk-free packages are being used not only to lure new talent, but also to retain veterans. More long-tenured chiefs are collecting sizable retention bonuses, which they keep for staying put -- no matter how poorly the business and investors fare.

Shareholder advocates disagree. "Retainer bonuses really drive me nuts," says Nell Minow, a principal of Lens Inc., an activist investment fund in Washington. "Sticking-around money is never in shareholders' interest. Performing money is in shareholders' interest."

"A program like this that has downsides in it when I don't perform is a good program," Dr. Joyce says. "Betting your money just like the shareholder bets his money is a thing that balances" the risk equation between management and investors, he continues. It shows the game is "not all stacked in your favor."

WASHINGTON -- When a lame-duck Congress voted to liberalize world trade late last year, little noticed were 129 pages of pension provisions tacked awkwardly onto the end of the bill.

But ever since then, calls have been pouring into offices of benefit consultants and members of Congress as people realized that these pages contained the most significant pension-funding changes in 20 years. The changes had coasted quietly into law on the back of an effort to pay the costs of introducing unrelated new global trade rules under auspices of the General Agreement on Tariffs and Trade.

Many companies are still learning what this mixed bag of pension-rule changes will do to them. For some, it's good news. They can make lower lump-sum payouts to some retiring employees, for example, or keep using pension surpluses for current medical costs of their workers. But others aren't pleased. They will have to contribute more, and faster, into underfunded pension plans or pay higher insurance premiums to the federal agency that insures the plans.

Even some companies with fully funded programs "will be surprised when they see how some of these changes will affect them," warns James Kaitz, chief lobbyist for the Financial Executives Institute, a trade group.

In addition, thousands of employees are phoning corporate and brokerage offices that deal with pension benefits to ask whether, as they have heard, an obscure new law involving interest-rate assumptions can directly affect their wallets. The result could cut thousands of dollars off expected lump-sum retirement payments.

"Which of our dadgum congressmen stuck that in there?" demands Jon Norman, a Dallas oil geologist who worries he could lose tens of thousands of dollars if he were to leave his job this year. "We need to string him up from the highest tree."

How, indeed, did major pension rules clear Congress as part of a trade measure? Although unrelated laws often piggyback on high-profile legislation, they usually are obscure bills unlikely to get far on their own and affecting relatively few people. But this case was a marriage of convenience. The bride, the pension bill, promised to raise nearly $1 billion in new money to help the groom, the GATT bill. Without that money, Congress wouldn't approve the GATT bill, and President Clinton's cherished free-trade legislation could have gone down to defeat.

But the administration had to accept major changes. Business groups threatened to fight the plan unless the funding provisions were toned down; they wanted some unpopular measures dropped, plus other concessions. "We made it clear that if Congress and the White House weren't willing to sit down with us and negotiate, we might not be willing to support GATT," Mr. Kaitz says.

Meanwhile, workers still got the underfunding problem mitigated. For example, General Motors Corp. must now speed up its plans for narrowing a $20 billion underfunding of its pension obligations; overall, underfunded corporate plans are delinquent by $70 billion. Without the improved funding, workers' pensions someday might be at risk because their employers didn't put enough money into the pot.

And to strengthen financially the Pension Benefit Guaranty Corp., the federal agency that insures such plans, the bill raised the premiums paid by the companies. The General Accounting Office recently cited the new law as it struck the PBGC from its "high-risk" list.

The prospects for reform didn't look good last summer after Labor Secretary Robert Reich and PBGC Executive Director Martin Slate unveiled their plan to address the chronic underfunding problem and seek higher insurance premiums. The plan was going nowhere. Then along came the trade bill, which had strong support but couldn't be passed unless Congress first found ways to offset its $12 billion, fiveyear cost, mostly due to tariff cuts. Without a compensating mix of new revenue and spending cuts, many Republicans said they would oppose the bill.

The final GATT vote was only months away when Leslie Samuels, assistant Treasury secretary for tax policy, came up with an idea: Marry the bills so pension reform could pass and a financial problem could be solved. It was very appealing because GATT had to be considered under "fast-track" rules; Congress could vote yes or no but couldn't amend the bill.

The idea gained favor when officials discovered the pension bride had more cash than expected, largely because of higher premiums for PBGC insurance. Then, they realized the reform bill would increase tax revenue by letting some companies pay retirees smaller lump-sum pension distributions; that cutback would reduce corporate tax deductions. It also would raise revenue by limiting tax-deferred employee and employer contributions to 401(k) retirement plans and stock-ownership plans.

Although pension reform was supposed to be revenue-neutral, the PBGC made a fortuitous mistake when deciding how the higher premiums should be figured. So, rather than bringing in a mere $150 million extra, the bill became $500 million "revenue-positive," as congressional experts figured it. This dowry was irresistible to Treasury matchmakers.

Yet arranging a deal wasn't easy. The House Ways and Means Committee backed it, but, at first, the Senate Finance Committee balked. Some senators, such as Democrat Robert Byrd of West Virginia, complained that the "fast-track" procedure wasn't appropriate for a complex pension bill. But Sen. Daniel Moynihan, the New York Democrat then heading the committee, gave his approval, provided the plan didn't cost a single GATT vote.

This alone didn't solve the problem. Many companies wanted GATT to pass but not at the price of tough, costly pension reforms. "Business groups were apoplectic," recalls Will Sollee, then the Senate committee's tax counsel.

Tough negotiations ensued, including an early battle that was literally a matter of life and death. The PBGC said employers assumed that workers die younger than they really do, so the employers could set aside less money for pensions. To remedy this fault and increase pension funding, the agency wanted to force employers to use modern mortality tables.

Auto makers led a countercharge. They complained that the tables were unrealistic because they were based on the life spans of Presbyterian ministers and college professors. Chrysler Corp., for instance, said its heavily inner-city work force died relatively young. After a squabble, industry groups were allowed to phase in the new tables over five years.

Companies with underfunded plans, faced with coughing up large sums and paying higher PBGC premiums, also resisted. Chrysler and GM, helped by industries such as steel and airlines, got the funding speedups stretched out. Then-Democratic Sen. Donald Riegle of automaking Michigan brandished a letter in which a dozen senators threatened to oppose GATT unless car manufacturers got their way.

Even employers with well-funded pensions, such as Ford Motor Co., then joined the lobbying effort. They feared tougher funding rules might someday push them into the underfunded category; so, they got some other provisions modified.

Companies with overfunded plans, such as AT&T Corp. and International Business Machines Corp., seized the chance to make hay of their own: They persuaded lawmakers to extend a pension-law provision, about to expire, that let them use excess funds to pay retiree medical expenses. DuPont Co., for example, will be able to keep using as much as $150 million a year of pension surpluses this way. The provision also increases tax payments available to finance GATT.

From the start, big employers had enormous leverage because they could threaten to withhold support for GATT. But small-business groups had leverage, too. They attacked a provision backed by President Clinton that would ban certain "age-weighted" retirement plans, which some companies use to shift most profit-sharing money to high-paid employees. Mr. Clinton urged the ban after he read about it in The Wall Street Journal and sent a clip to the task force working on the problem. But the ban was dropped when it became clear that small business would fight GATT if it stayed and that large companies also hated it.

Ironically, combining the bills gave employers other leverage. They realized any government backdown on a funding requirement would increase tax revenues available to finance GATT. "The more we gave, the more money we raised, and the corporations knew that," Mr. Sollee says.

As the merged GATT-pension bill headed for its final blessing, business also had to bend. Even employers that had been counting on the pension bill to fail "had to move away from just saying `no' to everything," says Nell Hennessy, the PBGC's chief negotiator. Employer groups admit they played a high-stakes game by threatening to withhold support for GATT, which they wanted to pass.

The Senate Finance Committee staff finally called lobbyists together last September to discuss the whole package in one place rather than continue issue-by-issue debate. After a flurry of faxes, meetings and middle-of-the-night phone calls, industry and pension groups, sensing a chance to make a big impact, decided a show of unanimity was needed.

At the first meeting, industry lobbyists outnumbered government officials by more than 5 to 1, and the group migrated to a larger hearing room. Employers began with an ultimatum. Michael Gulotta, a senior actuary at an AT&T unit, said employers would "absolutely not negotiate" the issue of allowing PBGC intrusion into mergers and acquisitions. They said their fight against this provision, which would require merging companies to inform the agency if one had a pension underfunded by $50 million or more, was the glue uniting them. The PBGC wanted notification so it could oppose deals that abandon pension commitments.

But although acquisition-minded companies such as AT&T and RJR Nabisco Holdings Corp. managed to scuttle the notification provision, the PBGC salvaged a requirement that privately held companies tell it about their merger plans. ("There were no private companies in the room" to defend themselves, a government negotiator notes.)

Thanks to the fast-track rules that forbade amendments, the merged bill passed without further tampering. "It was like a speeding truck that came out of nowhere," a pension-issues aide to one Democratic senator says.

In the end, almost everyone was happy. Employer concessions helped produce a bill that will pay an estimated $963 million of GATT's costs over five years; the other GATT revenue-raisers are accounting gimmicks, congressional staffers say.

Employers like some of the new pension rules. Starting this year, they can reduce lump-sum payouts and thus cut their benefit costs, especially for workers who take early retirement. Other companies may use the lump-sum option as a bargaining chip in labor negotiations, offering to delay using the new rate in return for union concessions on other items.

But many employees are upset.

The amount they can contribute to 401(k) plans has been reined in; the ceiling on contributions will be rising more slowly because of a new formula. An industry lobbyist complains that the 401(k) indexing provision (which wasn't opposed by industry groups) will cost him and his wife about $600 this year.

Employees who are retiring or changing jobs are especially unhappy. Under the legislation, companies can change the interest-rate assumptions used to calculate benefits from the 5% many used last year to the rate on 30-year Treasury bonds, currently about 7.5%. The higher rates result in a smaller distribution to retirees who take a lump sum rather than an annuity because a smaller investment is required to produce a given annual income. Depending on age, years of service and other factors, the reduction could be as great as 60% for people in their 40s and 30% for people over age 60.

"I was the last person in the world who would have thought GATT affected pension funds," says a 59-year-old librarian for a St. Louis chemical company, who declines to be named. She retired last December rather than wait until June, as planned, because she figured the bill could cost her $25,000 in benefits. "I didn't want to wait and see," she says.

She would be even angrier to learn that provisions that reduce employee lump-sums and 401(k) contributions weren't even needed for revenue purposes; other concessions to employers raised all the money required.

Pension cutbacks in legislation implementing the GATT world-trade pact are causing panic among pre-retirees and pandemonium among pension professionals.

"People are just pulling their hair out," says Greg Knezich, an engineer at Martin Marietta Corp., in Moorestown, N.J. "There's a whole bunch of us who are eligible for retirement, and everybody's running around in circles. We've contacted lawyers. The company's contacted lawyers. Nobody knows anything," he says.

The restrictions, which require employers to use new, higher interest-rate assumptions when they calculate lump-sum payments, could reduce pension distributions by tens of thousands of dollars.

But they took most pension professionals by surprise because they are buried in legislation signed into law last week by President Clinton to implement the sweeping General Agreement on Tariffs and Trade. "The whole lump-sum thing takes up only a few lines in the whole bill," says Mike Johnston, chief actuary with benefits consultant Hewitt Associates in Lincolnshire, Ill. He says employers and actuaries alike have been scrambling to interpret GATT.

Says a spokesman for Martin Marietta: "We're still reviewing the options."

The information vacuum has caused an opportunity for some eager securities brokers. A Merrill Lynch broker in the Southeast, who asked not to be identified, says many of his clients are about to retire from Chevron Corp. and are expecting pension lump-sum payments of $300,000 to $400,000. "I might have to advise them to go ahead and retire in the next two weeks," he says.

But before you panic, sue your employer or move up your retirement date, find out if you'll be affected and by how much. Employers have the discretion to phase in the new requirements during the next five years, according to Randy Hardock, benefits tax counsel for the Treasury Department.

Only about a third of large employers give employees the option of receiving a pension in a lump sum, instead of in a monthly stream of payments based on life expectancy. Typically, such employers calculate pension benefits based on age and years of service. When employees elect to receive a lump sum, that amount represents the present value of those future payments. Higher interest rates result in a lower lump sum because, as with bonds, rising interest rates reduce the current value of the asset.

If a lump sum is an option, ask what interest rate your employer uses to calculate lump-sum payments and compare it with the rate required under the GATT legislation.

Higher interest rates result in a lower lump sum because, as with bonds, rising interest rates reduce the current value of the asset.

If a lump sum is an option, ask what interest rate your employer uses to calculate lump-sum payments and compare it with the rate required under the GATT legislation.

Many employers use a rate set monthly by the Pension Benefit Guarantee Corp. The Pension Benefit Guarantee rate is currently 6.25%, up from 4.5% in January. Under the new GATT legislation, employers will be required to use a rate based on the yield on 30-year Treasury bonds. If the legislation were fully in effect today, the required rate would be 8.08%.

Marjorie Martin, a vice president of Sedgwick Noble Lowndes, a Philadelphia benefits-consulting firm, says the GATT-required rate would mean a reduction of about 7% in the size of a lump-sum pension distribution for a 65 year-old employee.

Younger employees would face much larger reductions, she figures. A 55-year-old employee who took early retirement or simply switched jobs would get about 25% less under the GATT legislation, Ms. Martin says; a 45-year-old, she says, would take a 50% cut, compared with rules in effect up to now.

The impact could be a good deal less, however, depending on an employee's income and the retirement plan's rules. For instance, some employers calculate lump-sum distributions above $25,000 using a rate that is 120% of the Pension Benefit Guarantee Corp. rate. Currently, that works out to 7.5%, not much lower than the rate that would be required were the GATT legislation fully in effect, says Thomas Butterworth, a Hewitt Associates consultant in Rowayton, Conn.

Even if you find the GATT rate would produce a significantly lower lump sum, all is not lost. Ask your employer if it will be implementing the new rate right away. While the new law takes effect in January, employers can phase in the new rate over the next five years.

"Some employers will set up a gradual move to the new rates, to cushion the blow," predicts Mr. Butterworth. He says they're more likely to do this for older, higher-paid employees.

That would be a big relief to people like Len Bainbridge, a 54-year-old pilot with AMR Corp.'s American Airlines unit who is contemplating retirement. He calculates he would receive a quarter of a million dollars less if the GATT rate were implemented next year. An American Airlines spokesman says the company hasn't decided how it will implement the new law.

Employers will be less likely to phase in the provision for employees who are younger and have less tenure. "The inclination may be to pay the minimum they can get away with," says Mr. Butterworth.

Some employers will apply the GATT rules immediately if that saves money. Matthew Deckinger, an actuary in White Plains, N.Y., says he's already heard from one client company that called to ask if the legislation would help it cut the size of its lump-sum pension distributions.

Finally, employees who are weighing the effect of GATT on their pension lump sums should ask their employer what "mortality rate" assumption they have been using to calculate payouts.

Some companies have been using unrealistically short mortality assumptions. New rules in GATT require employers to adopt a special 1983 mortality table that assumes a longer life expectancy than the ones many employers use. That would result in larger lump-sums.

Unfortunately, the 1983 table gives one set of mortality figures for men and another for women. But federal law requires employers to base pension assumptions on unisex mortality rates. The Treasury Department says it will issue a clarification next month.

GATT you!

Tucked away in the legislation implementing the GATT world-trade pact approved by Congress last week are provisions that will make it harder for Americans to save for retirement.

To help offset the revenue losses from the reduction in tariffs under the General Agreement on Tariffs and Trade, the amounts U.S. employees can contribute to 401(k) plans will be scaled back, and many workers will receive smaller pensions.

"This will save the government money, since by reducing the amounts employees can contribute to 401(k)s, more of their income is taxable," says Frank McArdle of the Washington office of benefits-consultants Hewitt Associates.

In 1995, the maximum contribution employees can make to a 401(k) plan will be frozen - for at least a year -- at 1994's limit of $9,240. Thereafter, the limit will rise more slowly than inflation.

"Anyone putting away the maximum 401(k) deferral will be disappointed," says Marjorie Martin, vice president at the Roseland, N.J., offices of Sedgwick Noble Lowndes, a benefits-consulting firm. "Usually, employees expect they can put away more each year."

Smaller employee contributions also will result in smaller employer matches, she says, further reducing the nest eggs. Many employers contribute 50 cents or so for every dollar an employee socks away in a 401(k). Unless employers choose to increase their matches, employees will end up with less.

The ceilings will rise more slowly in the future because of a new formula to calculate maximum contributions. In the past, annual cost-of-living adjustments were based on changes in the consumer price index. In the future, the cost-of-living adjustments will be rounded down to the next lower multiple of $500.

Without GATT, employees next year would have been able to sock away as much as $9,496, estimates Mike Johnston, lead actuary for Hewitt Associates in Lincolnshire, Ill.

Contributions to traditional pension plans (which base benefit payments on an employee's age, salary and length of employment) will be frozen next year, as well, he says. Using a similar formula, annual cost-of-living adjustments will be rounded to the next lower multiple of $5,000.

Don't think you can escape the damage by retiring. Starting next year, employers with traditional pension plans can reduce the lump-sum distributions to retiring employees by using new mortality and interest-rate tables provided in the GATT package. Most traditional plans make monthly benefit payments, but about a third of large corporations allow retirees the option of taking their money in lump sums.

Normally, such a move would be illegal under the Employee Retirement Income Security Act, which says employers can't cut back pensions they've already promised. But "the anticutback rules under Erisa are waived for purposes of implementing the GATT provisions," Sedgwick's Ms. Martin says.

Employers now will use actuarial tables that assume people live longer, reducing the amounts employees receive in pension lump-sum distributions.

Employers must also use higher interest-rate assumptions in their pension-distribution calculations. Instead of the 5% assumption many still use, they must peg their formula to the higher 30-year Treasury rate. Higher interest rates result in lower payouts to retirees, because, as with bonds, rising interest rates reduce the current value of the asset.

Ms. Martin calculates how these changes could affect a 65-year-old executive, eligible to receive a $9,900 monthly benefit, who opts for a lump sum. At 5% interest, the lump-sum value is $1,269,358. At 7.5% (which is close to the amount employers will now have to use), the lump-sum value is $1,061,519, or 16% lower.

The younger the retiree, the greater the reduction. If the executive were age 55, the lump-sum pension distribution would be whittled 30%, says Ms. Martin.

Highly paid executives, however, may not feel the bite, because their companies probably will offset any decreases imposed by the new law by raising the amounts the executives receive in "nonqualified" pension accounts.

The biggest brunt of the new law will be borne by middle-income employees, who are likelier to contribute the maximum amounts allowed to their 401(k) retirement plans.

What's more, the changes "could have a chilling effect on the benefits provided for middle-management and other nonhighly compensated employees," Ms. Martin says. She says some employers will be able to terminate their pension plans, because the new interest-rate assumptions will enable them to do so without having to put in more cash.

Still, GATT contains a number of provisions that require companies to shore up their pension funding, which could enhance the security of workers' retirement benefits. Details will be discussed today in a Department of Labor press briefing.