Not so long ago, many American workers could expect to receive monthly pension benefits from their employers after they retired. Yet in the last few decades, employers have moved sharply away from giving their workers pension benefits, turning to alternatives like 401(k) plans to shift responsibility for retirement saving and investment risk back to their employees.

Yet even though few new workers can expect to see any pension benefits at all, some employers aren't satisfied with a slow phaseout of their pension liabilities. Instead, employers are taking some extreme measures to try to buy their way out of their pension obligations once and for all, and the moves have major implications for the workers who have to decide whether to take pension buyouts.

Auto workers and pensions
A couple of months ago, Ford (NYS: F) decided to give about 90,000 former salaried workers an interesting choice. Rather than receiving monthly pension payments that would last as long as they lived, these workers could instead accept an upfront one-time payment. This lump sum would completely eliminate any future obligation Ford would have to pay those workers, and once the decision was made, workers couldn't go back and change their mind later.

Not to be outdone, General Motors (NYS: GM) came back with a similar but expanded offer. Not only would the company offer a lump-sum buyout to about 42,000 of its retirees, it would also buy a group annuity from Prudential that would cover monthly payments for the remainder of its salaried retirees.

The buyouts represent a huge part of the automakers' pension liability. They could cut as much as a third from Ford's $49 billion pension liability and about a quarter of GM's roughly $110 billion in obligations.

Moreover, with GM's annuity twist, the move helps to match up assets and liabilities better. With GM's U.S. pension fund already underfunded by nearly $13 billion, the company clearly wanted to avoid any further uncertainty about meeting its obligations going forward.

Who's next?
Underfunded pensions aren't just a problem in the auto industry. Throughout the economy, you'll find plenty of companies falling short on their pension obligations. According to a report from Fitch Ratings earlier this year, retailer Sears Holdings (NAS: SHLD) , aluminum giant Alcoa (NYS: AA) , and grocery store chain SUPERVALU (NYS: SVU) are just a few of the companies that are between 20% and 25% underfunded in their pension liabilities.

Companies with underfunded pensions have a few choices. They can roll the dice and hope that their workers end up not costing them as much as actuarial projections estimate. Yet with life expectancies having lengthened in recent decades, many companies have underestimated their eventual pension liabilities. That's likely a major reason Ford and GM want to opt out of the system going forward.

The other alternative is for companies to boost their pension funding through big contributions. But because of the impact those contributions have on current earnings, many companies are reluctant to divert cash away from earnings toward long-term obligations.

By comparison, buyouts like Ford's and GM's are a relatively easy way out for companies. Costs get bundled into a one-time event that's easier for a company to justify to investors. And once again, workers and retirees end up assuming the risk that those companies would otherwise have to bear.

A big trend
If Ford and GM are successful in getting their workers to sign up for their lump-sum payments, you can expect many more companies to jump on the bandwagon. Given the difficulties that everyone is having in producing solid, dependable investment returns, most employers would far rather pass on the responsibility for generating those returns to their workers. Sooner or later, employers will probably be out of the pension business entirely -- and at that point, you'll be completely on your own to produce the income and gains you need to retire successfully.

Dealing with your pension is just one aspect of smart retirement planning. To learn more about preparing for your golden years, let me suggest that you read The Motley Fool's special report on retirement investing. With its general ideas on how to assess investment opportunities along with three solid names to consider for your portfolio, you shouldn't miss out on what the report has to say. I invite you to click here and start reading your free copy right now.

At the time this article was published Fool contributor Dan Caplinger never had illusions of earning a pension from any employer of his. He doesn't own shares of the companies mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool owns shares of Ford and SUPERVALU. Motley Fool newsletter services have recommended buying shares of Ford and General Motors, as well as creating a synthetic long position in Ford and buying calls on SUPERVALU. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy won't give up on you.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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GM offered me a job when I worked doing construction making $20.00 per hour. I could have saved $10.00 per hour in the bank or 401k and supported my family on the other $10.00 per hour. GM was paying only about $10.00 per hour back then and offered health care and a pension so I quit my construction job and agreed to work for them. Now after 30 years they cut my health care and pension, etc, etc.. I kept my word with them and always gave them 110% everyday and I made them a hell of alot of profit but they have gone back on their word about what they said they would give me. In my generation a man kept his word or bargain even if he didn't like it later. A man still kept his word and promise no matter what. Hope some young person starting out today dosent make the same mistake whereever they work.

June 05 2012 at 5:30 AM Report abuse rate up rate down Reply

It is so amazing year after year CEO's get more and more and workers get less and less, companies need to pay their bills (and pension funding is one of them) before management is allowed to take out their cut. This is one point where our government needs to step in, because most company pensions are backed with government insurance and tax payers can and do end up paying when companies are allowed to skip pension funding. Just another scam to let rich get richer and the rest pay for it.

June 04 2012 at 10:39 AM Report abuse rate up rate down Reply
1 reply to msherer260's comment
Bah Rock Oobahma

I agree that it looks bad when CEO's and executives are handed fat bonus checks. It sucks when a company is failing to give out that kind of money, even if it is part of a contract. But look at the numbers, GM has $110 Billion in liability, the CEO's and executives bonuses are a drop in the bucket compared to that.

It was a nice idea, but in retrospect a bad one. You can't promise to keep paying people after they retire, it is not sustainable. You have to keep selling more things at better profits just to cover those bills. It sucks that people were promised these things and are going to suffer because they have to take them away, but it just killed Hostess and it will kill GM too, so it has to be done.

November 21 2012 at 6:01 PM Report abuse rate up rate down Reply