SOUTHERN CALIFORNIA Job Market : PART TWO: GETTING AHEAD : Job-Hopping : It may pay off--but not in pension benefits

Kathryn McKee knows the pluses and minuses of job-hopping from inside and out. A benefits specialist at First Interstate Bancorp, she knows from experience that when the young professional workers who make up a good portion of the company’s work force seek career advancement, they don’t necessarily look inside the company.

“There are certain occupations where the loyalty is more to the profession than the employer,” she said.

She also knows that younger workers are concerned more with First Interstate’s salary scale and vacation provisions than with such remote things as pensions.

“They’re really not interested in what you’re doing for them at age 65,” she said.

But there can be real disadvantages to frequent job-hopping. In particular, frequent job-hoppers may find, upon retirement, that they have little coming in pension benefits.

That is especially so if they often change jobs without staying long enough at any one company to become vested in its pension plan--that is, to secure a permanent right to some pension, however small.

“Pensions are part of the hidden paycheck,” said Thomas Jolls, a Los Angeles-based vice president at the management consulting firm of Towers, Perrin, Forster & Crosby. “It doesn’t become very visible until a person leaves the work force.”

At most large corporations, workers become fully vested in pension plans after 10 years of service. “The worst case,” Jolls said, “is when a person changes jobs every five years. He’ll wind up with no pension.”

As a mobile executive herself, McKee, now 49, can trace her own career progress through the pension benefits she’ll never receive.

McKee began her career at 23 at Mattel, where she spent 11 years. While there, she was the beneficiary of the toy maker’s generous profit-sharing plan.

At 34, she left Mattel to join 20th Century Fox, taking with her the vested right to a Mattel pension upon retirement and a lump sum payout from her profit sharing that was designed to be held for retirement but went instead to cover the expenses of having young children and house payments.

Fox had a pension plan in which workers started being vested after five years of service. But McKee left Fox six weeks shy of her five-year anniversary.

By the time she was 43, McKee said, her pension benefits “consisted of $55 a month from Mattel.”

Now she has seven years of service credited at First Interstate, where she says she expects to work until her retirement. “So at 65 I’ll have something, but not as great as if I worked here for 35 years.”

Such concerns would have been almost unheard of 15 or 20 years ago, when more workers remained with a single employer for most of their careers. In the late 1970s and early 1980s, however, personnel experts saw a sharp rise in employee mobility, partly because the baby boom generation chose to seek career advancement by moving laterally, from company to company, rather then vertically.

Although workers tend to voluntarily change employers only when they perceive clear benefits, personnel experts say those benefits can often be exceedingly short-term. They may include a higher initial salary or perceptibly enhanced promotion opportunities, but they should generally be weighed against possible disadvantages.

One of these, a product of the 1980s-era wave of corporate mergers, is the lower severance pay due short-tenured workers.

No one moves expecting his or her new employer to fold, but it pays to be wary of shifting jobs too often in industries particularly subject to such restructuring. In recent years, these have included the oil industry, high technology and airlines.

Although few youthful workers are truly sensitive to the importance of accumulating retirement rights, their increased mobility has contributed to important changes in retirement programs. One was the development of “defined contribution” plans as alternatives to “defined benefit” plans.

Under defined benefit plans, a worker has the right to a pension payout based on a formula involving his or her length of service and average salary in immediate pre-retirement years.

That means that even after workers are vested, their pensions still depend on their length of service at a company. Under a typical plan, a worker might be entitled to a certain percentage, say 2%, of his or her final salary for each year of service. Thus, a worker who spends 30 years at a company would receive 60% of his or her final salary, while one who spends only 10 years would be entitled to 20%.

Since the benefit is set by formula, the employer’s contributions are flexible to the extent they are enough to cover benefit payments.

In defined contribution plans, the employer is obligated to pay in a specific sum, generally a set percentage of each worker’s annual salary, with retirees ultimately receiving the resulting principal and interest. Unlike the payouts from defined benefit plans, the sums from defined contribution plans hinge largely on the success of the employer’s investment program.

For employers, these plans cut costs and eliminate complicated actuarial computations. For workers, the plans offer greater “portability”: Once workers are vested, they are entitled to the money that has been invested, so the worker’s relative length of service doesn’t alter the size of the pension from any given company.

Thus, someone who works at several companies with defined contribution plans might get the same pension at the end of a career as he or she would get by staying at one such company, assuming the employee remains at each one long enough to become vested.

All told, many pension experts say a certain amount of job-hopping is not that injurious if a worker does most of it before the age of 35 and later avoids it, particularly after 50. Because defined-benefit plans produce lesser benefits in the first years of a worker’s service, employees lose less if they switch companies early in their careers.

“The fact is, if a person makes a couple of job changes in his 20s or early 30s, it really won’t hurt them,” said Jolls. “If they can get in 30 years with one company, they’ll get a good pension.”