The New Pension Plans

A CBS News poll finds more than half of Americans are in a pension plan, and about three-quarters of them expect the money to be there for them at retirement, but it may not be nearly as much as they thought. CBS News Economics Correspondent Ray Brady reports more and more companies are switching from traditional pensions to what are called "cash balance" plans, and the cost to workers can be huge.

Climbing utility poles is tough, back-breaking work. Which is why 40 year-old Mike Murphy was hoping to hang up his tool belt and retire by the age of 58. "We work all our lives to retire, to kick back and do what you enjoy," Murphy says.

But dreams of a life beyond Niagara Falls came to end when Murphy's employer, the Niagara Mohawk Power Corporation, took away the traditional pension plan he had been counting on and replaced it with a new plan. In ten years on the job, Murphy never got shocked until he did the math. "I planned on retiring when I was 58, and at age 58, under the old plan, that I no longer participate in, my pension would have been $372,000. Under the new plan, it's $216,000," Murphy says. The difference adds up to a loss of $150,000.

Murphy and his wife Karmell couldn't believe it. Under Niagara Mohawk's rules, which his union agreed to, only those 40 and older with at least ten years of service could stick with the old plan. Murphy missed the cutoff by just eleven weeks. "It's just appalling to think that one day you could be worth this much money and the next day it could be right out the window," he says.

Murphy is just one of thousands of workers in their 40's and 50's caught in the middle of two pension plans. The old plan builds up credits near the end of the career, when salaries are usually highest. Under the new plan, called "cash balance," credits come early. But that's when salaries are lowest. And that can cost those with time on the job, big money.

But not all workers are complaining. At Kodak, everyone gets a choice: stick with the old plan, or go with the new program, the "cash balance plan". Lots of young workers like what they see.

For, thirty-somethings like Kodak manager Mike Miller, the new plan has one big advantage: if they change companies, they can take their pension with them. "It's not likely that we re gonna spend 30, 35 years at one company, retire from one company that we signed on with at the start of our career," Miller said.

Critics say companies are out to save big bucks, but for Miller, a cash balance may mean money in the bank now. For Mike Murphy though, the difference may mean more years on the job. He was planning to call it quits at 58.

Now, to retire with the pension he'd been planning on, Murphy will have to keep climbing those poles until he's 65.