The future of American workers' pensions will be at stake in 2004 as legal and legislative decisions are made during the year, a University of Alabama pension expert says.

President George W. Bush will re-introduce his Retirement Savings Plan and a proposal to set up Social Security private accounts in 2004, predicts Norman Stein, UA professor of law and a nationally recognized expert on pension plans. Both proposals will be voted down in Congress, but both will become the subject of much debate as campaign issues, Stein says.

"Bush's Retirement Savings Plan — which basically provides expanded IRAs, but with no deduction for contributions — was withdrawn last year after criticism that it would only be used by the wealthy and would reduce employers' incentives to sponsor pension plans," Stein said. "This year I expect Bush to re-introduce essentially the same legislation. It will go to Congress, but eventually be voted down.

"Bush's proposal to move Social Security to private investment accounts won't go anywhere because it doesn't address the obligations to older and middle-aged workers who have already contributed to Social Security. Funding the Bush proposal would require massive new taxes to cover that shortfall and I don't think Congress is going to be in a tax-raising mood," Stein said.

Cash balance pension plans will also be a key issue. About a third of the Fortune 500 companies have moved from traditional pension plans to cash balance plans in recent years. "These plans have generally allowed companies to save money by slashing benefits for older employees," Stein said. "They often offer employees little more than a miserly 401(k) plan, paying very low interest on account balances. A number of recent court decisions cast doubt on some cash balance plan practices and one lower court recently held that such plans are illegal."

Stein predicts that Congress will address some of the issues dealing with cash balance plans. "And if the decision (that the plans are illegal) is upheld by the circuit court, Congress will pass legislation to make them legal, but probably with some minor protections for older employees. If the decision is reversed, it is less likely that Congress will provide any protection for older employees," he said.

Underfunded pension plans will also continue to be an issue in 2004. Many employers owe a lot of money to their pension plans thanks to the drop in the stock market over the last several years and historically low interest rates.

"Congress will bow to industry pressure by changing the rules on funding pension plans. They will say they are strengthening the rules while actually weakening them. This will help companies in the short run, but threaten employees' pensions in the long run," Stein said.

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