Savings and loans. Banks. Insurance companies. What else do savers have to worry about today?
Maybe their pension plan.
The rising number of large companies unable to meet pension obligations has left the national fund that protects retirement benefits with a $1.8 billion deficit.
As a result, questions are surfacing about how pension money is invested. Managers of public-employee retirement funds in Orange County, Calif., and Kansas have come under fire for their work, and the Labor Department has sued three employers recently for their alleged mishandling of pension money.
Traditionally, the choice of assets used to fund future retirement benefits is left to the employer.
That is because the risk of bad investment decisions rests with the business owner, who must fund any shortfall needed to pay benefits to retirees.
"You just have to hope your boss has you in mind," says Kenneth South, pension specialist at Shearson Lehman Brothers' office in Costa Mesa, Calif.
Employers must keep workers up to date on the pension plan's progress. And experts advise employees to give those reports a thorough review.
Companies must give plan beneficiaries a summation of the fund's assets once a year. This brief document, however, won't provide a detailed look at the plan. Whether it is a discussion with benefits officers or reviewing corporate records, employees checking into their pension plan will find it a struggle.
A complete annual report must be provided upon an employee's request. The report should contain more information about the pension plan's financial backing, its management and -- at companies with more than 100 workers -- the result of an audit by outside accountants. Companies may charge an employee requesting the documents a nominal copying fee.
Still, the data can be difficult to decipher, experts say.
"The major question a person must ask themselves is, do they have confidence in the company's long-term future?" said Larry Jessoe with the Orange, Calif., office of William M. Mercer, a benefits consulting firm. That's the best way to know if you'll collect pension benefits, he adds.
It takes a trained eye to understand the subtleties of an asset mix of stocks, bonds, real estate and bank accounts. Pensions are typically 60 percent invested in stocks, with a majority of the remaining 40 percent in government and corporate bonds.
A worker trying to review the track record of investment experts hired to help run the fund may have difficulty obtaining pertinent information. The experts' results with other funds can be misleading, and they only guarantee that their history is solid -- not what they plan to do with your money.
Even looking at the pension plan's past investment returns can be problematic. It may be difficult to choose a proper benchmark to gain perspective on the results.
"This is a fairly tough assignment," said Daryle Johnson at Pacific Mutual Insurance in Newport Beach, Calif. "But that doesn't mean employees shouldn't be active with their pension plan."
Experts recommend that workers question an employer about whether the pension plan is over-funded or under-funded.
Plans are put through various financial tests that estimate their ability to pay benefits for current and former employees. Plans unable to meet those obligations without additional funds from the company are deemed under-funded. Those with a surplus are over-funded.
Don't be fooled, benefits experts say. Those classifications -- strong as they may sound -- may be meaningless in determining a company's ability to meet its obligations.
Some companies, for example, deliberately choose to under-fund pension plans to use the money for expansion. Such businesses pay some retirement benefits from current cash flow rather than from profits generated by plan investments.
Over-funded plans have been a tempting target for corporations seeking to use the cash for other business needs. In the 1980s, many cash-rich pension plans were liquidated and beneficiaries were given annuities to meet their retirement promises.
Companies pocketed the money left over from the purchase of the annuities, and employees had no say about it. Restrictions have since been put in place that make such transactions tougher to complete.
Those regulations may become more strict now that annuity holders are discovering that some insurers backing them -- most notably Executive Life of Los Angeles -- are on shaky financial ground.
"I don't think it's fruitless to show interest," said Julie Weyand of the Orange County office of Towers, Perrin, a benefit consulting firm. "Most employers are acting prudently. Most want to give their employees a real benefit."
There are numerous guarantees in place to protect workers. Plans at larger companies are audited by independent accountants annually. The Internal Revenue Service and the Labor Department have stiff paperwork and funding requirements for companies offering pension plans.
And in the worst-case scenario, the federal Pension Benefit Guarantee Corp. will protect some retirement payouts. The PBGC -- funded by levies on companies with pension plans -- will pay up to $27,000 a year in benefits to people who retired at age 65 with plans that are out of money. But large plan failures could wipe out the PBGC's ability to pay. It already provides benefits for some 110,000 Americans.