PERSPECTIVE ON PENSIONS : Do-It-Yourself Plans Aren’t Enough : Half of the work force can expect no retirement benefits; employer contributions must be mandatory for all.

Recently, small-business owners at a conference cheered President Clinton’s announcement of a legislative proposal for streamlined pension plans. Pensions have never been a favorite topic for politicians, who have tended to view them as “eye-glazing.” That Clinton brought them up at the White House Conference on Small Business attests to the huge--and justified--concern people have about paying for retirement. Looming behind the President’s words is the fact that millions of Americans are retiring without a decent income. The future is likely to be worse.

Forty-five million people--half of the private work force--don’t have access to any private retirement plan. All they can expect, in addition to whatever savings they’ve managed to set aside, is Social Security, which on average pays less than the minimum wage. Since the typical worker retires with savings of less than $10,000, pensions earned on the job are critical.

Most people without pensions work for small firms, which have never offered pensions in significant numbers. Now, many of those that did have plans are dropping them, a trend that worries a lot of people, including the President. What he didn’t say at the White House conference is that big firms are cutting back on their plans too. One way they trim their pension coverage is by hiring employees as “temporaries,” who are ineligible for the pension plan. At the Bank of America, for example, only 19% of the work force is now permanent. The enormous growth of “temps” in this country has created a new class of pensionless workers. The same is true for the ballooning part-time work force.

In addition to excluding people, companies are contributing less to pension plans. Over the past decade, corporate contributions to pensions have declined by 50%. One might think that employees would be up in arms since this is, in effect, a pay cut. The reason they’re not complaining is that companies are switching to do-it-yourself savings plans such as the popular 401(k), which give people tax breaks on what they can save for themselves. A lot of folks think they’re great, especially when the company matches a percentage of their contribution. The match is made to look like corporate generosity. It’s no such thing. Even with a match, savings plans represent giant savings for companies.

Wrapped in the rhetoric of “self-reliance,” most savings schemes aren’t really about retirement at all. They’re about cutting companies’ costs. If they boost savings at all, it’s short-term. True, for those who can stash away large sums every year beginning early in their work life and refrain from taking the money out to pay for the kids’ education, savings schemes may work for retirement. But most people wouldn’t use 401(k)s if they couldn’t cash them out. Others contribute so little it won’t make much difference if they do leave the money in. The median amount in 401(k) accounts today is only $5,000.

Do-it-yourself savings plans have not only diverted employees from the realities of pension loss, they have given politicians a way to avoid the hard policy questions posed by the retreat from pensions. Current pension proposals on Capitol Hill, like the Republican “American Dream” individual retirement accounts, are merely savings schemes under fancy names. They’re a hefty drain on federal revenue and there’s no evidence that they will boost overall retirement income.

Recognizing the problem, the President has put forward a proposal for simplified plans for small businesses, requiring employers to contribute 1% of wages. But the lion’s share of benefits would still go to better-paid employees who can afford to save, an inequity at the heart of all savings plans.

An alternative to the savings approach is to restore pensions as part of the wage package. Possibilities include improving the current voluntary private pension system, adding a second tier to Social Security, or, as other countries have done, making pension contributions mandatory for all. Discussion of these kinds of serious solutions is what citizens need to demand from policy-makers--and they ought to demand it now.