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WASHINGTON, Oct. 13 - According to experts at a leading global consulting firm Watson Wyatt, the present financial crisis severely highlights the comparative pros and cons of defined benefit pensions and 401(k) plans.

In general, what exists in comparison is what might be considered the predictable, largely guaranteed income of pensions (including the so-called hybrid plans such as cash balance plans), and the sharply contrasting 401(k)s with their day-to-day fluctuating account values, which are now bringing havoc to planned retirement programs.

Watson Wyatt senior retirement consultant Alan Glickstein says that the economy is presently treading on uncharted territory. He points out that the 01(k) plan has only been around for about 30 years, and that means that we've not yet had a generation of workers retire on all or mostly 401(k) assets. He asks the question as to what happens when market volatility makes 401(k) investment returns and retirement income so unpredictable?

As a part of a 401(k) plan, employees are investing their assets as individuals. As they are approaching their retirement, employees have to construct individual paths for reducing the risk in their 401(k) accounts and for providing some degree of predictable income for their retirement. Increasingly, employers are beginning to participate in this process, as they are starting to offer employees target-date retirement funds and, to a somewhat lesser degree, annuity options in their 401(k) plans.

In the case of pensions, the sponsoring companies are investing assets as one large pool and in the context of a longer time line than is the case with individual employees. This enables them to more easily deal with market downturns. In addition, the assets of company pension plans are guaranteed by the sponsoring company and, in the case of most benefits, with an additional layer of security, by an agency of the federal government.

Individuals must undergo the investment risks in a 401(k) plan, while in the case of pensions, it is the companies that are assuming the risk, along with the opportunity, especially in a good financial climate, to provide more efficient benefits.

Glickstein says that the financial current environment underscores some latent employer risks that are inherent with 401(k) plans. An example of this might be that they make it harder for companies to predict who will retire and when. Those employees who rely on 401(k)s are usually more likely to be worrying about their financial security. This means that during difficult financial times, the situation may create an additional drain on morale and productivity.