The first wave of workers whose retirement security was hit by the decline in the U.S. economy were those covered by 401(k) plans. As many large companies such as Enron, WorldCom, Adelphia, Arthur Anderson and Tyco plummeted in value or disappeared altogether, tens of thousands of their employees' 401(k) accounts literally evaporated overnight. Their pensions were simply gone.

Hundreds of thousands of other employees covered by 401(k) plans have seen their account balances fall by double digit percentages in each of the last three years, as the U.S. stock market has been locked in a downturn unrivaled since the Great Depression. The retirement expectations of virtually every 401(k) plan participant are dramatically worse today than they were in early 2000.

As the country's economic decline now moves into its fourth year, however, even the traditional bulwark of retirement security, defined benefit plans, are beginning to crack under the weight of the sagging economy. The first signs of difficulty are being seen in some of the largest corporations in America. The largest of the large is the General Motors Corporation which in January of this year announced that its pension plans ended 2002 with a deficit of $19.3 billion. The Company also announced that it anticipates its pension costs will triple in 2003; and many other such corporate reports are expected in the coming months. As recently reported by The New York Times, IBM, Honeywell International, Johnson and Johnson, 3M and Ford Motors all were required to make huge cash infusions into their pension plans in late 2002 to meet their funding obligations.

The New York Times also reported that these corporate pension problems have little to do with any change in the number of people retiring, or increases in benefits. Rather it is entirely the result of the three-year decline in the U.S. stock markets, coupled with a decline in interest rates to historically low levels.

As the price of stocks have fallen, so has the return on the investment portfolios of corporate pension plans covering more than 44 million current and future retirees. At the same time, historically low interest rates have further hurt these plans. Federal law requires that corporate plans utilize U.S. Treasury interest rates to measure their long-term liabilities. The lower the interest rate utilized, the higher the long-term liabilities. Thus, while corporate plan assets have been falling, their liabilities have been growing.

Multiemployer plans like the Central Pension Fund have, for a variety of reasons, not experienced the level of challenge facing corporate plans. Unlike corporate plans, where the corporate sponsors were permitted to suspend annual contributions to their pension plans during the boom economic years of the last 1990s, employers in multiemployer plans continued to make full contributions throughout the period. Also, multiemployer plans have historically chosen much lower, and more conservative, interest rate assumptions for measuring their liabilities than have corporate plans and, therefore, have not been as greatly impacted by the decline in interest rates. Finally, multiemployer plans traditionally have chosen more conservative investment policies than corporate plans --- with a lower allocation to stocks and greater allocation to bonds. This has helped multiemployer plans as the bond market has outperformed the stock market over the last three years.

Nevertheless, if the economy continues in decline, multiemployer plan trustees will remain vigilant to make certain they take appropriate action to assure the continued strength and stability of these plans, which provide the finest form of retirement security available to workers in the United States and Canada.