Home

Index

Retirees - 6
Retirees - 5
Retirees - 4
Retirees - 3
Retirees - 2
Retirees - 1

(6/12/03) - Retirees of many of the largest U.S. companies have been banding together to try to protect their benefits. Grass-roots groups have sprung up at IBM, Verizon and Lucent in recent years -- and now it's AT&T's turn.

Larry Cutrone of Bridgewater, who was laid off from his job at a facility in Montvale in 2001, is one of the founders of the AT&T Retirement Association. Members are upset about the company's switch to a cash-balance pension, which they say unfairly penalized older workers.

Cutrone, who spoke at the AT&T shareholders meeting yesterday in Savannah, Ga., said his pension went from an anticipated $47,000 a year to less than $24,000 because of the change.

Middle managers are angry because union-represented workers have benefits protected by collective bargaining agreements, while top management has generous retirement packages guaranteed by contract.

The pain is not being shared equally, Cutrone and others argue. "I think you're starving the retirees," Cutrone told AT&T Chairman and Chief Executive David Dorman.

Dorman said he could not comment on the cash balance issue because it is the subject of a lawsuit.

Managers who feel burned by the pension changes have been meeting informally for years, and have supported shareholder proposals to allow older workers to switch back to the previous pension model. One of those proposals was defeated by shareholders at yesterday's meeting.

Bethlehem Retirees Lose Health Benefits

The Association of BellTel Retirees announced victory over Verizon in getting one shareholder proposal passed and another one implemented. 59% of the shareholders voted to curtail executive golden parachutes. That was a very worthwhile proposal. The meeting was held April 23, 2003.

Verizon agreed to implement a proposal to exclude pension credits from executive compensation, so it was not necessary to vote on it. This is even better than getting the proposal passed. If it was merely passed, it may have never been implemented. This was another very worthwhile proposal. Executives should not be financially rewarded for manipulating the employees’ pensions. In many cases it amounts to taking money out of the employees’ pockets and putting it into the executives’ pockets.

C. William Jones, Executive Director of the Association, said “For a little grassroots retiree organization to defeat Verizon in the proxy is nothing short of Herculean, but to win two proxies in just one year is absolutely remarkable. This proves that small investors can make a huge difference.”

The group was successful because they decided to do something in their own behalf, besides complaining to each other. If merely complaining to each other solved problems, there would be zero problems in the workplace today.

The BellTel Retirees claim to have been the first grassroots retiree organization to use a proxy resolution campaign, starting in 1998.

The Association of BellTel Retirees was formed in 1996 by a handful of NYNEX retirees to advocate for retiree pension and benefit rights. Today the non-for-profit association, based in Cold Spring Harbor, NY, has grown to include more than 90,000 Verizon retirees among its membership. The Association can be contacted at P.O. Box 33, Cold Spring Harbor, New York 11724 or 800-261-9222 or association@belltelretirees.org

(2/11/03) - Stanley Morris never believed it would come to this.

When he retired from Sparrows Point in 1997 with 43 1/2 years of service, Morris, 68, thought he was secure with health care benefits from Bethlehem Steel Corp., which covered him and his wife at a cost of $150 a month.

But now, Morris and other retirees say, Bethlehem has turned its back on retirees of Sparrows Point and its other steel mills.

Bethlehem, which agreed over the weekend to be sold to International Steel Group Inc. of Cleveland, announced Friday that it planned to end health and life insurance benefits for retirees and dependents March 31 - a devastating blow to 19,000 Baltimore-area retirees and dependents. Many of these retirees, who spent decades at Sparrows Point, face the prospect of skyrocketing monthly health care insurance bills.

"You feel like you put in those type of years, you make an agreement with the company," said Morris, who lives in Joppa. "And now they can simply say, 'That's it ... we're not going to do it anymore'?"

"My wife and I have to start thinking about how we're going to handle it," Morris said. "Our health plans will be out the window. I'll probably have to find a job."

Bethlehem said it had no choice but to terminate retiree health benefits for its 95,000 retirees and their eligible dependents. The benefits have cost the company about $20 million a month since it filed for bankruptcy protection in October 2001.

"We can no longer afford to do that," said Bette Kovach, a spokeswoman for the company. "A lot of companies have terminated their retiree obligations immediately following bankruptcy. We chose not to do that while we worked on a plan of reorganization as well as efforts to sell the company."

The action will hit union and salaried retired workers alike, erasing life insurance, prescription drug benefits and medical coverage that supplements Medicare or is the only insurance perhaps for those under 65.

Raymond H. Glock, 70, who put in 40 years at Sparrows Point and retired as a crane millwright, expects to pay a lot more than the roughly $70 a month he has been paying. Glock has asbestosis and colon cancer, which is in remission, and his insurance covers tests and medication for the cancer.

"They promised us all this and then they renege on their promises," Glock said. "We all got asbestosis, all kinds of diseases."

Eighty-one-year-old Lewis Sensenbach ended his 42-year career as a Bethlehem shipyard accountant before April 1984, which means his employer-paid prescription drug benefits are slightly more generous than the plan offered to those who retired after that date.

Bethlehem Steel picks up 80 percent of drug costs - no small amount considering that many new drugs can cost hundreds of dollars for a month's supply. "When you get older, medicines are required to keep you alive," said Sensenbach, one of the roughly 27,000 nonunion Bethlehem retirees.

In good health

While Sensenbach enjoys good health, he worries about the future and what might happen to former colleagues who can't afford to lose their benefits.

The steelmaker's bankruptcy and recent sale has left Sensenbach sad, but not bitter, about what it will mean to his finances. "We were proud to be employees of Bethlehem and certainly there were mistakes made, but I'm not here to blame anyone or any group of people," he said.

Representatives of retiree groups expect to meet with Bethlehem officials tomorrow in an attempt to win an extension of the termination date to May 31, said Bruce E. Davis, a lawyer for the Retired Employees Benefits Coalition (REBCO), which represents retired salaried workers.

Davis said that several insurance companies are bidding on a replacement health care coverage package. The goal is to find one that offers comparable benefits at premiums that are only a little higher than what many retirees pay now.

Those who face the steepest increase are salaried workers who retired before 1985 and pay about $6 a month in premiums, Davis said. They could be looking at $200 a month per person, he said.

Some relief could come in the form of a union-negotiated trust to help cover health care costs for retirees.

ISG, which bought and reopened the steel mills of the defunct LTV Corp., and the United Steelworkers of America union reached such a deal with retirees of LTV's mills. Both union and ISG officials said a similar trust is being explored in Bethlehem's case.

Some unionized employees still punching the clock at Sparrows Point feel as if they have labored for decades under stiflingly hot, dangerous conditions only to be sold out by their employer as they near retirement.

Mike Hartnett, a 47-year-old tractor trainer who started with the company 27 years ago and hoped to retire by 60, said his family had deep ties to Sparrows Point. His great-grandfather worked for Bethlehem, as did both grandfathers and his father. All have seen how years in the mills can impair their health, making health benefits critical for many.

No retiring now

"Most of us walk out of here with some type of health ailment," Hartnett said. The Dundalk father of four makes $43,000 a year. He wonders how he will juggle a mortgage, car payments and independent health coverage that could run $600 a month or more when he retires.

"Most of us will work until the day we die because retirement is no longer an option," Hartnett said. "That is what Bethlehem Steel Corp. has done to us."

Previous related article:

New Duke Retiree

(NOVEMBER 18, 2002 Issue) - When C. William Jones retired from Nynex in 1990, the company feted the debonair managing director with a toast-filled bash at "1095," its tony midtown Manhattan headquarters. The VIPs gave Jones a plaque commemorating his 30 years of service, a Minolta camera, and a flurry of old-boy handshakes. Like hundreds of others before him, they then sent Jones on his way, expecting him to do as any company lifer does: go quietly into the good life, whittling away his handicap at the club and logging some luxury travel with the wife.

Little did they know that Jones, 64, would be back--not as an executive has-been but as a leader in a rapidly growing movement: the revenge of the company man. Jones now heads the 90,000-member Association of BellTel Retirees. The group is one of many in a new, nationwide organizing effort made up of former white-collar managers and execs who are disgusted by corporate greed and outraged by pension and health-coverage takebacks. It would be one thing, they say, if the promised benefits were being slashed for the good of the company. Instead, they're watching CEOs bank hundred-million-dollar fortunes. "It's not unions out there saying this to executives," says Karen Friedman, director of policy strategies for the Pension Rights Center. "These are people who used to be them."

These revolutionaries in Izods are fast becoming a formidable force. Whereas a few years ago just a handful of agitators were on the scene, hogging the mike at annual meetings and firing off largely ignored letters to CEOs, today there are more than 2.5 million. They are flocking to retiree groups fighting IBM (IBM ), General Motors (GM ), Boeing (BA ), Western Union, U.S. West, Qwest (Q ), and Verizon (VZ ), among others. Armed with their well-honed managerial skills, they use flashy Web sites, lawsuits, proxy proposals, and political pressure to further their cause. So far they've been successful in backing a new bill before the Senate and House that would protect retiree medical coverage, the latest benefit that has fallen under the corporate scalpel.

Their chief target: the legions of large companies that stopped giving retirees their cost-of-living increases in the early 1990s--even as they used the ballooning pension surpluses to pump up profits. Jones points out that Nynex retirees haven't gotten a pension hike since 1991--even though the new parent company, Verizon, had $12 billion in excess pension funds in 2001 and pays $3 million a year in consulting fees to retired Co-CEO Charles R. Lee. "They are now starting to view retirees as a cost center," says Jones. "And they're cutting their losses." Verizon counters that its benefits stack up well against those of other companies.

In April, Jones's BellTel retirees came close to their biggest victory by winning 42.8% of the vote on their proxy proposal to bar Verizon from including pension earnings in its calculations for executive compensation. Verizon says the issue will likely be resolved through new accounting rules. Jones vows to be back on the ballot in 2003.

Plenty of other groups have also notched gains. This year, a retiree class action brought against Sears, Roebuck & Co. (S ) pressured the company into offering partial relief after it cut life-insurance benefits. And IBM (IBM ) workers continue to fight Big Blue over its new cash-balance pension plan, which offers many workers a substantially smaller payout than what they would have gotten under the old system. So far, the group, made up of current and former employees, says its efforts helped persuade IBM to exempt employees age 40 and above from being forced into the new plan. But they are still fighting for younger workers. "These people were promised a secure retirement," says former IBM engineer James Leas, a retiree organizer, "and now they're not getting it." IBM declined to comment.

Lately, the groups have been drawing blue-collar colleagues. Disgruntled Gen Xers--as well as boomer managers unable to retire--are also secretly joining, offering up valuable inside information about new cost-cutting schemes in the works. In this downturn, some of Corporate America's toughest critics are coming from within.

Rank-And-File Pensioners Struggle

(9/22/02) - When former President David Coulter left Bank of America in 1998 at age 51, he got parting gifts worth more than $30 million, plus a $5 million annual pension and free medical and dental benefits for life.

When Hugh McColl retired as BofA's chief executive officer in 2001, he was guaranteed a pension of about $2.4 million per year, plus other benefits.

Louise LaMuth retired from BofA in 1970 after working at the bank in San Francisco for more than 20 years. She receives a monthly pension check for $47. 57.

The gross amount is $190.83, but BofA deducts $143.26 for medical and dental benefits.

LaMuth, 88, asked a man at the bank what will happen when her health insurance, which goes up every year, exceeds her gross pension benefit, which is fixed. "He said, 'We'll just take the difference out of your checking account,' " she says.

The gap between executive and worker pensions -- which has been widening for years -- has become downright obscene.

More than $9 million per year in retirement pay wasn't enough for former General Electric CEO Jack Welch. He also got a palatial Manhattan apartment, rides on the company's Boeing 737, tickets to cultural and sporting events, and a host of other perks. Welch agreed to give some of them back last week after his wife publicized them in divorce papers.

Helen Quirini, an 82-year-old retired GE factory worker, calls those givebacks "a lot of fluff. What is he giving up?"

Quirini heads the GE Retirees Justice Fund, which works ceaselessly for higher benefits for GE retirees.

The group pickets in front of GE plants, submits shareholder resolutions at annual meetings, lobbies legislators big and small, and hustles the media.

GE has given retirees six pay increases since 1980, and Quirini's group takes partial credit for some of them.

The last raise, in 2000, raised Quirini's monthly pension $160, to $756. But she's still not satisfied.

"Jack Welch is getting $800,000 per month. Is he worth 1,000 times more than me?" she asks.

LaMuth has also been pressing BofA for a pension increase, but unlike Quirini -- who has help from several GE unions -- LaMuth has been a voice in the wilderness.

During the past five years, she has written more than 100 letters to BofA, bank regulators, legislators, lawyers and the media.

She started in 1998 after Bank of America and NationsBank -- trying to win support for their merger -- pledged $350 billion in loans for affordable housing, small businesses, consumers and economic development.

Her first batch of letters asked whether BofA could steer a bit of this "unprecedented generosity" to its own retirees, who were barely making ends meet.

LaMuth's monthly income consists of her pension, $662 in Social Security and $80 from a Treasury note.

She has been divorced since 1952 and has no children. She gets by thanks to help from a relative and San Francisco's rent-control laws. She has been living in a tidy, one-bedroom apartment on Russian Hill with a sweeping view of the bay since 1954, so her rent is way below the market rate.

Through the years, LaMuth's typewritten letters criticized Coulter's severance package, McColl's retirement benefits and the bank's charitable contributions, always asking why BofA couldn't spare a little of that largesse for retirees.

LaMuth has gotten only a few responses. In 1999, Sen. Dianne Feinstein, D- Calif., forwarded her letter to bank regulators, who forwarded it to BofA, asking the bank to respond to LaMuth.

The bank sent her a letter explaining that it was not obligated to give cost-of-living increases, although it gave several in the 1980s and one in 1996 to retirees who were at least 80. The last increase raised LaMuth's gross pension by $32.65 per month.

The letter gave three reasons why BofA couldn't give more raises. One, inflation has been low. Two, the bank has other constituents besides retirees to consider, such as customers, shareholders and current employees. Three, any increases would have to come out of bank profits.

Last year, LaMuth wrote to Kenneth Lewis, BofA's new CEO in Charlotte, N.C. That prompted a phone call from a cordial BofA representative who spent more than an hour on the phone with LaMuth, again explaining why BofA couldn't pay more.

This year, LaMuth got a response from the Pension Rights Center, an advocacy group in Washington.

The group encouraged her to band together with other BofA retirees, as the GE folks had done. But LaMuth doesn't know any retirees as desperate as she, and she doesn't have a computer, which was essential to the GE group's organizing.

So last month, LaMuth placed classified ads in the San Francisco Bay Guardian and SF Weekly, soliciting BofA retirees who think their pension is too low. Her ad in SF Weekly ran on top of one for a gay sperm bank.

The Pension Rights Center gave her a post office box for responses but so far, she hasn't received any.

Judy Apfel, project coordinator for the Pension Rights Project, an affiliated consumer group in San Francisco, says BofA is no different from most companies. Few private-sector employers guarantee cost-of-living adjustments.

Apfel says LaMuth "is suffering from her original low pay."

She joined BofA in 1941 as a teller. At that time, she says, women were openly paid less than men for the same job. When the women asked why, they were told, " 'The men are officer material,' " she says. She quit in 1944 because she couldn't get a leave to help her sister, who was having a baby in Florida. She returned about six months later, but her original employment records were lost.

She left again in 1946 when she got married. She went back in 1951 and stayed until 1970, working as a proxy administrator and as assistant building manager at 1 Van Ness. When she retired at 55, her salary was $535 per month.

After that, LaMuth worked at various art galleries. In her 60s, she became an extra in movies and got bit parts in TV commercials. "They needed some old people who weren't senile," she says.

LaMuth got several thousand dollars for appearing in a Pacific Bell Yellow Pages ad and $7,000 in residuals for a poultry commercial. She was a nun in several movies. "I made a good nun," she says.

Those jobs didn't generate much of a nest egg, and she never had a 401(k) plan, which wasn't developed until the early 1980s.

LaMuth hasn't given up her fight, but it's an uphill battle.

Many companies are struggling with their bottom lines, although BofA is doing better than many.

It earned $6.8 billion last year, down from $7.5 billion in 2000. But in the first six months of this year, it earned $4.4 billion, up from $3.9 billion in the same period last year.

At year end, its qualified pension plan had $8.26 billion in assets and $7. 61 billion in obligations, giving it a $658 million surplus.

Last year, the plan added $62 million to BofA's bottom line, says Brett Trueman, an accounting professor at UC Berkeley.

Commenting on LaMuth's situation, BofA spokesman Brad Russell says, "The formula for pension payouts is explicitly stated in materials provided to our associates. The payout, whether in the form of a lump sum or annuity, is based on an associate's account balance at retirement. The bank doesn't arbitrarily set a payment amount each year and then adjust it based on inflation."

It's hard to believe, but LaMuth's gross pension -- $190.83 per month -- is higher than average. In 2000, people 65 or older drawing a company pension were averaging $161 per month, according to the Employee Benefit Research Institute.

I asked James Klein, president of the American Benefits Council, which represents large employers, to explain why top executives should be getting exorbitant retirement packages when ordinary people are getting so little.

"You won't find me defending that," he says. "It's really two different unrelated phenomena. What companies do with respect to their top executives -- whether it's good, bad, defensible or indefensible -- is one thing. What's happening to benefit plans for everybody is another phenomenon."

Soaring health care costs for active and retired workers "are crowding out retirement benefits," he says. Health care is less controllable than pension costs "and the benefit that is more immediately sought."

Quirini, the GE retiree, says the executive-pay issue has made it easier for retirees to call attention to their plight.

"Right now it's a ripe time for these human interest stories to be put forward, to get someone in Congress to listen," she says.

Quirini says LaMuth should rally other BofA retirees, which is hard to do without e-mail and Web sites.

"I've spent at least $2,000 paying people to teach me the computer," Quirini says.

After that, "It's a combination of writing to the company and the board of directors, going to shareholder meetings and speaking up and hopefully finding someone in that group who's with you, trying to find people in your own area who are fighting this, trying to get people in newspapers and magazines to write your stories."

Retirees also get help from the Pension Rights Center (www.pensionrights.org) and the Coalition for Retirement Security (www.pensions-r-us.org), an umbrella for retiree groups.

Apfel of the Pension Rights Project says LaMuth should target legislators, not BofA.

"We can't make a change that's substantive because BofA says let's give her money. Giving her charity doesn't solve the problem," she says.

At least LaMuth still has medical coverage. Many companies are cutting or eliminating health insurance for pensioners. And that, Apfel says, can only be changed through legislation.

Health Benefits for Retirees Continue to Shrink

Health benefits are drying up for today's retirees, and those leaving the work force in the next 20 years will shoulder even more of the costs, according to a new survey.

In a study of 56 retiree health plans offered by companies with at least 5,000 active employees, Watson Wyatt Worldwide, a human-resource consulting firm in Washington, found that 17% have "virtually eliminated" their liabilities for such benefits by requiring retirees to pay the full premiums. And 20% already have eliminated such plans altogether for new hires.

Watson Wyatt's study, scheduled to be published Monday, is the latest, and broadest, in a recent round of studies looking at shrinking corporate contributions to retiree health benefits. Thursday, the federal Agency for Healthcare Research and Quality said that the share of private-sector establishments offering health insurance to retirees under age 65 dropped to 12% in 2000 from 21.6% in 1997. Offerings to retirees who were 65 and older dropped to 10.7% from 19.5% during the same period.

The Watson Wyatt survey shows that employers that continue offering retiree health benefits to future retirees and new hires have also cut those perks in several ways. First, they have reduced their share of the premiums, on average, from 80% for current retirees to less than 60% for future retirees. Second, many employers are now requiring longer stints at the company to qualify, with only about one-quarter of the plans offering benefits as of last year to workers retiring with five or fewer years of service, compared with nearly 90% in 1984. And companies increasingly are tying their share of the premium to the employees' years of service.

Another tactic gaining in popularity is a cap on the amount that a company will pay toward each retiree's annual premium. Although only one in four of the companies surveyed have imposed caps on their contributions for current retirees, 39% have imposed them for current employees who qualify for future benefits, and 45% have them in place for new hires. Those benefits are shrinking, too: The median cap of $4,450 for current retirees under the age of 65 drops to $3,900 for future retirees.

"Recent inflation rates in health costs meant that virtually all the plans with employer-spending caps will hit the caps within the next five years," the study predicts.

Companies also are starting to introduce retiree medical accounts, in which participants are typically credited a fixed dollar amount for each year they are in the plan. So far, only 2% of the companies surveyed had adopted accounts for current retirees as of last year, but 13% had such arrangements in place for new hires.

So, in the 1980s, a 60-year-old employee with 10 years on the job could expect to contribute 39% of total lifetime retirement medical costs not paid by Medicare. By last year, that share had shot up to 68%. And by 2031, retirees shifted to medical accounts or plans with caps can expect to pay 92% of the total cost -- or just about the whole bill.

"All of a sudden, people are getting hit by these big premium increases. [Employees] are beginning to be more sensitive to it and looking at the fine print to see what they're going to get," says Sylvester Schieber, Watson Wyatt's research director. Meanwhile, cash-strapped companies "are facing extreme pressures to get costs under control. ... It's like watching a slow-motion car wreck, and we think we're getting right to the bump part."

Scattered groups of retirees have filed lawsuits against their former employers attempting to win back benefits, but few have prevailed. The Association of BellTel Retirees Inc., with about 86,000 members, banded together with other corporate retirees to form the National Retiree Legislative Network last year. Together, they are lobbying for congressional action to stop large employers from canceling or reducing employees' health benefits after they have retired. However, their bill is stuck in committee with no Republican sponsors.

Watson Wyatt's Mr. Schieber doesn't think that effort goes far enough. He wants Congress to provide tax incentives for companies to fund employees' future health benefits while they are still working. With large numbers of corporations going out of business over the course of individuals' careers, he says, "I have come to the conclusion that we cannot secure these benefits across time unless we are funding them as people are earning them."

Retirees Devastated Over Health Insurance

HOUSTON - When the Simpson Pasadena Paper Co. in suburban Houston sold its plant three years ago, David Wilson took early retirement so he could continue to receive medical insurance.

It was an attractive offer for Wilson, who was 56 at the time, because he and his wife would have insurance until they would be covered by Medicare at age 65.

But that tidy arrangement abruptly ended this summer when Wilson, along with 180 other employees, received a letter from the company saying they'd have to start paying $150 a month per person in premiums for health insurance.

And the plan wouldn't begin to cover their bills until they had first paid $1,000 in deductibles for physician services and $200 in deductibles for prescription drugs.

And even this reduced plan will end in two years.

"It's been devastating," said David Wilson, who worked for the paper mill for 33 years.

"We took a beating sometimes on wages to keep our insurance," said Wilson, who collects $360 a month from his pension.

"Then we end up like this: They try to cancel on you."

Wilson has found another job -- repairing garage doors. But the loss of insurance is a big worry, because his new employer doesn't offer the benefits.

To make matters worse, his wife, Dana, was laid off from her customer-service job at Reliant Energy in April.

Skyrocketing insurance costs have pushed other employers to make substantial changes to their benefit plans.

The cuts in retiree medical benefits come on the heels of cutbacks in life insurance for retirees, said Markson.

About four to five years ago, some companies figured life insurance wasn't as important a benefit to a group of people who don't have a lot of financial obligations, said John Markson, a benefits consultant at Towers Perrin in Houston.

Several years ago, then-President Bill Clinton suggested expanding Medicare voluntarily to those 55 and older who are laid off and can't find or afford new insurance. That way, they'd be covered but at a lower rate than the private market.

A bill that would expand Medicare to those 55 and older is pending. But it's been stalled since it landed in the House Ways and Means Committee in March 2001.

It's upsetting, said U.S. Rep. Gene Green, D-Houston, who is a co-sponsor of the Medicare bill, because older workers who can't find insurance really need some type of affordable bridge.

Dana Wilson said she needs to find a corporate job -- with benefits. But in this economic climate, that's not so easy.

The New Retiree Health Plan?

FORT SMITH, Ark. –– An 88-year-old man with terminal cancer killed his Alzheimer's-afflicted wife, fearing she would be left without adequate care after his death, then shot himself twice but survived, authorities said.

George Hastings was arrested on a first-degree murder charge. He was in critical condition Tuesday in an intensive-care unit.

Hastings called 911 on Monday to report that he had shot 84-year-old Hazel Hastings at their home. When police arrived, they found that he had also shot himself.

He said he had just weeks to live and feared no one would be able to take care of his wife.

"This is just a real sad case," said Jarrard Copeland of the Fort Smith Police Department. "Your heart goes out to both of them."

Companies Cut Back

(7/19/02) - Crippling stock market losses and shortcomings in the U.S. pension system are creating a retirement crisis that has hobbled retirees and workers on the cusp of retirement and threatens even those in their 30s and 40s. Already, nearly half of those saving for retirement, 46%, say they will have to postpone retiring because of the shrinking stock market, according to a USA TODAY/CNN/Gallup Poll. But stock-market losses are just one symptom of a larger crisis, many experts say. Forget, for a moment, people panicked about retirement plan losses. More than one-third of adults say they have no money saved in any kind of retirement account, according to the poll.

The retirement system just isn't working for a lot of Americans. Many don't have access to a pension or retirement savings plan at work. Others choose not to join their 401(k) plan or get a late start and don't contribute enough. Workers often don't know much about investing and don't care to learn, often letting their portfolios languish in overly conservative investments or going overboard on company stock.

The prognosis is grim, especially for middle-class families. "The average American household has virtually no chance to reach an adequate retirement savings in the next 50 years," says Christian Weller, a retirement specialist at the Economic Policy Institute. Retirement dreams are taking a beating:

• 37% of those saving for retirement say they are doing only a fair job of managing their retirement portfolios, and 7% say they are doing a poor job.

• 44% of those saving for retirement say they expect to live less comfortably in retirement, according to the poll.

• 29% of retirees say their standard of living has gone down in retirement.

Single women are among the most vulnerable. Linda Peterson, 57, works as a freelance writer in Arlington, Va., after being downsized out of a job. Widowed more than a decade ago, she has a small pension from her husband's job and another from a job she previously held. Together, they will provide about $800 a month in retirement.

Though she has some savings and will receive Social Security benefits when she retires, she calculates she still needs to save $300,000 to $400,000.

She doubts she'll make it. At the moment, she says, it's a stretch to find extra cash. Though friends are starting to retire, Peterson plans to work full time until she's 67 and, after that, part time.

"It's not fun," she says. "But I welcome a period of being underemployed, because it's a preview of what retirement will be like."

The broken contract

It wasn't supposed to be like this. For years, there was an implicit social contract: If you worked hard for a company, you'd be rewarded with financial security in retirement. Of course, there were always gaps in the traditional pension system, which mostly covered workers at large manufacturing companies. But today the social contract is on shakier ground than ever, many experts say.

"It's an untold secret," says Karen Ferguson, director of the Pension Rights Center. "You can work a lifetime and do everything right and not be able to pay your bills in retirement."

Paul "P.J." Palombo will be 62 next month. A long-distance truck driver for Kimball International, Palombo started contributing to a 401(k) plan in 1982. When he switched jobs, he rolled the money into an individual retirement account and contributes yearly. "I got in when the getting was good, and it grew from zero to almost $250,000," he says. "I said, 'This is great! I can retire at 55.' "

But the bear market has ravaged his portfolio. "I've lost close to $50,000 this year alone. I've got thousands of shares of mutual funds, and if I sell now, I've lost it all."

Palombo, who is single, isn't sure when he can retire. He jokingly says he'll have to work until he's 137 years old. "Then I'll have to supplement my retirement by flipping burgers at some interplanetary burger joint 37 light years from the planet, and I'll still be quite poor."

The U.S. retirement system was structured so that retirees could count on three sources of income: Social Security, pension benefits and personal savings. Social Security now faces a 75-year deficit and was never intended to fully support workers in retirement. But 44% of retirees say it is their primary source of income, according to a survey by the Employee Benefits Research Institute (EBRI).

As the Social Security system has come under stress, the private pension system also has been radically transformed. Companies shifted away from traditional pension plans, which guaranteed benefits to retirees for as long as they lived.

Instead, most offer "defined-contribution" plans, such as 401(k)s. They put the burden on workers to sign up, contribute and decide how to invest. As an incentive, many employers offer matching contributions.

But companies on average contribute only 2% of pay to 401(k)-type plans, compared with 6% to 7% of pay that they typically contributed to traditional pension plans, says Brooks Hamilton, a retirement plan consultant in Dallas.

During the long-running bull market, there were few complaints from workers, who dreamed big dreams as their 401(k) portfolios jumped in value.

Last October, Mitch Meyers, 47, gave up a 20-year career in the defense industry. He moved to Las Vegas and took a job in a casino, expecting that by the time he reached his 60s, his savings would be worth close to $1 million. Instead, his nest egg, worth $340,000 in October, has shrunk to just over $200,000. He is seeking to return to a job with the government or a defense contractor.

Of course, younger Americans have more time for investments to recover and more working years in which to save for retirement.

Joseph Hannan, 73, has seen the value of his estate dwindle as the stock market has fallen. He uses frequent-flier credits amassed during a career in international sales to visit his four children, scattered around the country. But most of his discretionary income has dried up, and he recently canceled a planned cruise. "It's too late for me to do anything but bite the bullet and hope it comes back," says Hannan, a retired oil company executive from Centennial, Colo.

Falling below the poverty line

The current market downturn, which has stretched into the longest bear market since the Great Depression, has focused attention on the pitfalls of do-it-yourself 401(k)-type retirement savings plans. The conclusion of several recent studies: Many workers will be shortchanged in retirement.

• Most experts say retirees need 75% to 80% of their pre-retirement income. Yet more than 40% of middle-age households won't be able to replace even half of what they made on the job, according to a study by the Economic Policy Institute. And nearly 20% will have retirement incomes below the poverty line. The study, based on federal data between 1989 and 1998, does not even take into account the bear market.

• New research on the retirement security of workers in Kansas found that the shortfall between retirement income and the cost of health care, food and housing for the elderly in Kansas could reach $700 million a year by 2031. The report by EBRI and the Milbank Memorial Fund focused on Kansans ages 38 to 66.

  Jack VanDerhei, a Temple University professor who created the model used in the analysis, calls the results sobering and says he believes that studies in other states would produce similar results.

• Studies that focus on account balances in 401(k) plans often give an overly optimistic picture of retirement savings. That's because high-income workers skew the results. At the end of 2000, the average account balance was $49,024. But 44% of participants had balances of less than $10,000, according to an EBRI/Investment Company Institute database.

• High-income workers not only can afford to save more in their retirement plans, but they typically get a better investment return.

At one company he studied with more than 5,000 employees in its 401(k) plan, Hamilton, the Dallas retirement consultant, found that workers at the bottom 20% of the pay scale earned 6.48% on their contributions in 1997, compared with a 28.27% return posted by the top 20%. The pattern was the same at three other companies. Lower-income workers tended to opt for more conservative investments, in part, Hamilton suspects, because some are less-sophisticated investors and others are unwilling to take risks with what may be their only savings.

"We've got the makings of a disaster," Hamilton says. "A lot of people will reach retirement in despair."

Though not everyone agrees with such dire predictions, they generally concur that workers who are closest to retirement will have a hard time recovering from years of inadequate savings and steep stock market losses.

But many younger workers are also nervous. Christine Viera, 32, a stay-at-home mother of two and a former legal secretary from Danvers, Mass., is not optimistic. Her husband, a carpenter and warehouse manager, has a retirement annuity through his union. She plans to return to work in a few years and will put aside money for retirement. But Viera expects that Social Security will have vanished by the time she and her husband retire. The volatility of the stock market scares her. "My fear is that someday we'll have to move in with the kids and have them take care of us," Viera says.

Even if Social Security is still available when Viera retires, the benefits are gradually declining. In 1990, Social Security benefits replaced 43.2% of the pre-retirement income of the average worker. That will slip to 36.7% by 2030.

"The scheduled reductions will hurt middle-income families," says Alicia Munnell, director of the Center for Retirement Research at Boston College. She is even more worried about the toll the cuts will take on the 50% of workers who don't have a company pension or 401(k) plan.

The Enron debacle — and stock collapses at WorldCom, Lucent Technologies and elsewhere — destroyed the retirement savings of many workers overly invested in their employer's stock. In response, lawmakers are trying to pass legislation that mostly would ensure that workers are not locked into company stock. They are also focused on ways to provide more advice to workers on how to invest their 401(k) plan assets. But many retirement experts say Congress is being myopic.

Band-Aid solutions

Though some workers would certainly benefit from professional advice, it wouldn't help those who don't have access to a 401(k) plan or can't afford to contribute to one.

"Enron, Global Crossing and WorldCom should have been a wake-up call alerting policymakers and the public that our private retirement policies are going in the wrong direction," Ferguson says. "Instead, members of Congress are ignoring the inevitable consequences that many more millions of retirees will be without enough money to make ends meet."

Some experts would like to see a return to traditional pensions. Edward Wolff, a New York University economist, says Congress could give tax incentives to encourage companies to switch back.

Others say that's an unrealistic goal. They say there are ways to improve 401(k) plans. For instance, Congress could mandate company contributions for all workers, even if they don't contribute to the plan. Others suggest that Congress require automatic enrollment in plans with the option to opt out, prohibit company stock as an investment option and provide workers with an inflation-adjusted annuity when they retire.

But some retirement experts warn that companies may drop 401(k) plans if the measures are expensive or tough to implement.

And none of those reforms would protect workers from the risk that the stock market will tank just before they are ready to retire. That hazard also has cast doubt on proposals to put a portion of Social Security benefits into private investment accounts.

"We need to have a discussion about whether we truly want to put the average person at so much risk," Munnell says.

As Ferguson puts it: "There is an enormous amount riding on making sure the pension system pays off for older Americans."

Contributing: Thomas A. Fogarty

Retired Verizon Communications Inc. workers came unusually close this week to forcing the regional Bell phone giant to stop including income generated by its pension plan in its formula for setting executive pay.

The same issue has been raised at several large companies this year, including General Electric Corp. and International Business Machines Corp., as scandals like the one at Enron Corp. put the spotlight on workers who lost their retirement savings while executives profited.

Despite management opposition, an item proposed by the Association of BellTel Retirees Inc. won 43% of the vote at Verizon's annual meeting in Minneapolis, up from 19% the year before. Both the company and the 71,000-member group's president attributed the jump to the support of Institutional Shareholder Services, an influential proxy adviser among institutional investors.

Many companies, including the regional Bells, have significant pension plans that contribute substantially to their net income. A Credit Suisse First Boston study in 2001 said 30% of the companies in the Standard & Poor's 500-stock index reported pension income that added an average of 12% to pretax earnings.

In February, McDermott International Inc., an energy company based in New Orleans, set a precedent when it excluded pension gains from its executive compensation formula in response to a shareholder proposal from Amalgamated Bank of New York.

Verizon retirees object to pension gains being part of the calculation for tallying bonuses and incentive pay because they don't reflect management's skill or operating performance and can, in fact, compensate for operating losses. Verizon would have posted a loss in 2001 if it hadn't been for $1.8 billion in pension income, according to the Institutional Shareholder Services analysis. Verizon spokesman Peter Thonis said that 2001 results included substantial noncash charges that also weren't related to operating performance.

Despite the increased show of support from shareholders, Verizon has "no plans to change our policy at the present time," Mr. Thonis said.

Including pension gains in executive compensation formulas "does provide a disincentive for the executives to give pension increases to the retirees," said Bill Jones, president of BellTel Retirees. The less a company spends on workers' benefits, the more the pension fund adds to the bottom line.