Word: pension
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...companies are beginning to design plan options that provide at least partial inflation protection. If a worker chooses to take a lower initial retirement benefit, for instance, his pension checks will be increased each year by a fixed percentage of the rise in the Consumer Price Index. H.J. Heinz Co. has already introduced an indexing option, and several other companies are considering...
Another way to strengthen retirement benefits is to make a greater return on pension fund investments. Private plans, which control nearly $300 billion in assets, traditionally have been conservative in placing their money. At the end of last year, half was in common stocks. Now corporations are looking for more exotic investments for their pension plans. Says Martin McKerrow, vice president of pension consultant A.G. Becker: "They are willing to search the field for a wider variety of assets, such as real estate, international investments and stock options...
...legislation Congress passed in July will help workers currently employed prepare for retirement. One provision permits any person to set up an Individual Retirement Account, even if he is already participating in a company pension plan. Previously only self-employed people or those working for companies without a retirement program could establish such accounts. An individual will be able to put up to $2,000 into a tax-deferred account created by his company, or by a financial institution, such as a bank or brokerage house. The money is usually not taxed until the employee retires, when he is expected...
Employees can set up the new IRA accounts starting on Jan. 1, and retirement experts believe that they will be widely used. Says James Dockerty, who manages pension benefits for 35,000 Shell Oil employees: "IRAS will become very popular...
Companies could make the IRAs even more convenient by combining them with their pension, profit-sharing or payroll-savings plans. By doing so, employee contributions to such plans would be made tax-free until the worker retires. No major corporation has yet established this type of IRA, largely because of the bookkeeping problems involved. The IRA deposits cannot be mixed with existing pension funds, and so companies would have to keep two sets of records: one for the regular company plan and another for each employee...