The news from Detroit is enough to rattle anyone relying on a traditional pension: an unprecedented bankruptcy filing by a major U.S. city that opens the door to possible sharp cuts in benefits.
It’s still far from clear that the courts will let Detroit slash pension benefits as part of its bankruptcy filing. But is the city’s situation a harbinger of things to come for Americans relying on traditional defined benefit pensions?
The answers are important for millions of American workers and retirees. Although we hear constantly that pensions have gone the way of the dinosaur, in the public sector, 83 percent of workers still had access to a traditional pension plan in 2010, according to the U.S. Bureau of Labor Statistics.
And 35 percent of Fortune 1000 companies still sponsored active pension plans in 2011, though that figure is down sharply from 59 percent as recently as 2004, according to employee benefits consulting firm Towers Watson.
My Reuters Money column today explains how you can assess the risks in your own pension plan.