Last March, $29.4 billion Memphis-based FedEx Corp. disclosed that it would expand its four-year-old cash balance plan to cover all eligible employees, not just new ones. It was no coincidence the announcement followed on the heels of two watershed events for defined benefit plans: the release of FAS 158, the new accounting rule that will compel companies to mark to market their pension liabilities and assets and report them on their balance sheets, and the signing into law of the Pension Protection Act, which legitimized cash balance plans and revised rules for determining employers' minimum contribution levels.

FedEx CFO Alan B. Graf Jr. readily acknowledged the connection when he announced the changes: "In light of the unacceptable risk and volatility that the accounting rule and funding changes are presenting, FedEx is making necessary changes to ensure that the company will remain competitive and help our employees prepare for a comfortable retirement."

Such actions do not signal the end of defined benefit pension plans–which in fact have received a shot in the arm in the last year from a buoyant equity market and higher interest rates. According to a recent study of Fortune 1000 companies by Watson Wyatt Worldwide, the number of corporations at serious risk of experiencing an underfunding problem dropped to 9% in 2005 from 17% in 2003. The number of companies expecting to close off DB plans to new employees is also dropping.

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