Pension plans remain a factor in the nation's retirement income landscape, but they're taking a hit like most other investment vehicles and threaten to put a major hurt on the balance sheets of corporate America.

According to recent report from the Center for Retirement Research, the value of equities in retirement plans plunged $3.8 trillion between October 9 and the year-earlier period. Of that decline, half came from defined-contribution plans and the other half from defined-benefit plans, with the latter portion almost evenly split between the public and private sectors. As of the end of 2007, defined-benefit plans comprised 18% of all U.S. retirement assets.

The report, The Financial Crisis And Private Defined Benefit Plans, points to data showing the number of underfunded plans rose as of October, raising the chance that some companies might not meet their pension obligations without severely taxing their financial health. The potential upshot: layoffs, pension freezes, or bankruptcies.

The report seemed to be spot on when, in mid-November, about 300 leading companies and business groups asked Congress to suspend parts of the Pension Protection Act of 2006 designed to guarantee that companies have enough funds to meet their pension requirements. The business lobby contends these mandates are straining their finances and might force them to cut jobs to conserve cash during the economic downturn.

The Pension Protection Act requires defined-benefit plan sponsors to eliminate any unfunded liabilities over a seven-year period. The Center for Retirement Research found that based on the current depressed state of equities, plan sponsors next year will need to boost their pension plan contributions by $90 billion to meet their funding mandates.

According to an Associated Press story, the letter from the business groups asked Congress to give companies more time to reach full funding. It also wants accounting changes that will enable companies to spread losses to their plans over longer periods of time to buffer against times such as this when plans quickly and deeply sink in value.

Alicia Munnell, director of the Center for Retirement Research, hopes the current crisis in retirement planning will spur action to fix what she believes is a broken system. "I can't think of a worse retirement system than the one we have," she says. Her solution is a new tier that would marry the defined-contribution model with some level of guarantees. "People can't have this level of insecurity as they approach retirement," Munnell says.