BOSTON ( TheStreet) -- Pension plans, also known as direct-benefit plans, are going the way of the $10 health-insurance co-payment, the thrift savings plan and the lifelong job guarantee.Companies are increasingly finding pension plans too expensive, too complicated and too risky when compared with 401(k) plans. Dow-member companies dominate the list of those that offer conventional pensions. A survey by Towers Watson, the global consulting firm, found that only 17% of Fortune 100 companies still offer a direct-benefit plan, down from 67% in 1998. Those that offer direct-contribution plans, such as 401(k)'s, total 58%, up from 10%. Despite the decline, many of the country's best-known companies still offer pensions to at least some employees. GE), in its annual report, said its plan was fully funded as of Jan. 1 and running effectively enough that it shouldn't have to subsidize it this year or next. It holds assets of $58.3 billion. Responding to stock-market conditions, Exxon Mobil ( XOM) contributed $3 billion to its U.S. plans, up from $53 million in 2008. Other large direct-benefit plans include AT&T ( T), Verizon ( VZ), Ford ( F), Lockheed Martin ( LMT), UPS ( UPS), Honeywell ( HON), Johnson & Johnson ( JNJ), Procter & Gamble ( PG), Hewlett-Packard ( HPQ), 3M ( MMM), Pepsi ( PEP), Bank of America ( BAC), Citigroup ( C) and Wachovia. According to Towers Watson, 58 companies in the Fortune 100 currently offer only a direct-contribution plan to new hires. Others are increasingly considering "hybrids," such as cash-balance plans. Proponents claim that hybrid plans reduce costs for employers. Participants in cash-balance plans also continued to see their pension accounts grow during the financial crisis, unlike the sizable drops suffered by most 401(k) accounts. In a cash-balance plan, a participant's account is compensated each year with a set employer contribution and interest credit (either a fixed rate or a variable rate linked to an index such as the 1-year Treasury bill rate). When a participant is eligible to receive benefits under a cash-balance plan, the distribution is either a lump-sum payment or given as an annuity. Investment risk is borne by the employer. Still, The National Institute on Retirement Security, a non-profit advocacy group, makes the case that pensions can provide same benefit as individual 401(k) plans at half the cost. In a research paper, A Better Bang for the Buck: The Economic Efficiencies of Defined-Benefit Pension Plans, it says defined-benefit plans pool longevity risks among large numbers of individuals. Because defined-benefit plans, unlike investors, don't age, "they are able to take advantage of the enhanced investment returns that come from a balanced portfolio throughout an individual's lifetime."
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