The corporate pension plan your parents got when they retired after 40 years of service has gone the way of the fins on a 1958 Cadillac, done in by stock market losses and high maintenance costs. 

Elizabeth Hartnett, a lawyer with Mackenzie Hughes in Syracuse, calls this year's unraveling of pension plans a "tsunami." 

The stock market has eaten into pension investments, and to make up those losses companies will need to take what would have been profit or operating income and put them into shoring up the plans, she said. 

That will make companies rethink their pension schemes. They may freeze the plan so that a worker does not accrue more benefits from it or terminate the plan altogether, experts said. 

The recent stock market meltdown has accelerated a trend away from traditional pension plans. Some 62 percent of large companies surveyed by the U.S. Government Accountability Office last year said they had frozen their plans. 

And three of four large pension plans said they would not consider starting a new defined benefit pension plan, according to a GAO report released Monday. 

"The problem is much greater than I think people realize," said Barbara Bovbjerg (pronounced boberg), who watches the U.S. retirement system as the director of education, work force and income security issues at the GAO.
 
"Half of American workers don't have a pension at any given time. Over the period of a working lifetime, most people don't have enough money to retire on," she said. 

Yet, the 2008 Retirement Confidence Survey by the Employee Benefit Research Institute shows that more people believe they will receive a defined benefit pension than there are participants in such plans. A new survey is due this month. 

Defined benefit pension plans are what most people think of as a traditional retirement plan. Your employer salts money into an account for you, invests it and promises you a monthly check when you retire. The amount is usually based on a complicated formula that includes your wages and number of years with the company. 

In theory, the longer you work, the more you receive in retirement. 

In 1980, 30 million people worked for companies that had defined benefit pension plans. By 2004, the number dropped to 20.6 million, according to the Employee Benefit Research Institute. 

Defined benefit plans represent about 10 percent of all pension plans, according to EBRI. 

By 2004, the majority of working people had a defined contribution plan, usually a 401(k)-type plan where the onus is put on them to save for retirement. Some companies provide a match for the employee contribution. 

Under such plans,the money a worker receives at retirement is based on how much was put away, and how well the investments performed. 

What the GAO has found is that neither traditional plans nor 401(k)-type plans are serving the needs of the majority of U.S. workers. 

The GAO has found that people don't put enough away in their 401(k) accounts for retirement, or workers withdraw money before retirement when they change jobs or borrow against the account, Bovbjerg said. 

Congress tried to shore up defined benefit pension plans through the Pension Protection Act of 2006, which ordered pension plans to come up to full funding that is, to have enough money to pay all their current and future obligations. Those who couldn't reach the goal were placed on the critical or endangered list with the Department of Labor and given time to make changes to their plans. 

When a plan falls short, a company has two ways to bring it to full funding: add money or cut benefits. 

Some local union workers saw their pension plan benefits cut to make up for losses in the stock market and from investments with holdings in Bernard L. Madoff, the Wall Street tycoon who has pleaded guilty to cheating investors out of billions of dollars. 

The GAO reported that the recent stock downturn has left pension plans at some of the country's largest companies underfunded by $409 billion, erasing an estimated $60 billion surplus in 2007. 

The large firms' pension assets were only able to cover 75 percent of their obligations, the government estimated, down from 104 percent the year prior. 

Worried that companies would cut jobs or go out of business as they scrambled to fulfill their pension obligations, Congress in December amended the 2006 law to provide relief to employers. 

It's likely that the trend of freezing defined benefit pension plans and moving to more 401(k) plans will accelerate, Bovbjerg said. 

When companies freeze a defined benefit pension plan, it means that companies will no longer add to the pension put aside for workers. That's a problem for middle-aged, mid-career workers. 

"If you are 45 or older and your plan is frozen in a way that means you don't accrue any more benefits, you suddenly have to start putting money in a 401(k) or IRA to save for the future. That money doesn't have the amount of time to grow that it would if you started to do that when you were 25," Bovbjerg said.
 
Since most salaries rise the longer someone works for a company, workers of frozen plans will lose those high accrual years that would have added to their benefit, she said. 

So "people with 20 years in, they're just at the point where they would really be earning higher accruals they're going to lose that, and at the same time have to save and there's not time for that money to grow," Bovbjerg said. 

The GAO has a project under way that looks at ways to develop a system to mitigate some of the risk workers face with the pension system, Bovbjerg said. The report looking at pension innovations in this country and abroad will come out this summer, she said. 

"The concern that I have most fundamentally is that so few Americans have pensions," Bovbjerg said. "All the different things that we've done to improve retirement saving haven't altered that very much, regardless of what system we adopt."