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Are pension promises a thing of the past?

More companies are now finding ways to cut pensions for employees. NBC's Scott Cohn reports.
/ Source: CNBC

He spent more than 40 years on the cutting edge, developing new computer chips for Motorola. He also was developing a sizeable retirement nest egg — or so he thought. We'll call him "Frank."

He is 63 years old and figuring he may still need work as a consultant. He asked NBC News to conceal his identity, but Frank's story exposes a growing crisis within a crisis.

"I got screwed," Frank says. "And a lot of other people got screwed."

Not only are companies in troubled industries like airlines cutting their employees' pensions; now healthy companies are finding ways out of their pension promises, too.

According to the human capital and financial management consulting firm Watson Wyatt Worldwide, it's a growing trend. And 26 more Fortune 1000 companies did it last year — nearly a 58 percent jump from the year before.

Asghar Alam, of Mercer Benefits Consulting, says companies complain the plans are too expensive and the rules too complex.

"The pension funding rules need to be simplified," Alam says, "at least to the point where an average rocket scientist can figure them out."

Motorola simply sold off the division where Frank worked. But, deep in the fine print, there was another part of the strategy: The pensions for 22,000 employees like Frank would be frozen, and the new company would not offer a pension plan of its own.

"Just all of a sudden," Frank says, "our pensions ceased — boom!"

Frank keeps his Motorola pension, but he figures he lost at least $150,000 in benefits he would have built up.

"They just basically stole pensions from people, period," he says. “They stole money from people."

In an e-mail, Motorola says creating the new company "was not driven by benefits considerations," but rather by highly competitive markets.

Whatever the reason, across America, a decades-old bond between employer and employee is now strained to the breaking point.