Tomassi was delighted. The extra $20,000 was much less than the tax hit he would have taken on his $105,000 share if he had invested it elsewhere. Even better, if he keeps the plan fully funded and retires at 65, he'll receive at least $75,000 a year before paying income tax, assuming an investment return of 5.5 percent. That's on top of his 401(k), into which he still deposits $49,000 a year. He signed up that week. "I benefit and the employees benefit," he says.

In many ways, Tomassi is the perfect entrepreneur for a pension. Not only is his staff small and likely to stay that way, but most of his workers are young and earn far less than he does. As a result, they qualify for a smaller pension benefit. Tomassi's company is also stable, which means he should be able to make his annual payments.

Indeed, one reason pensions have been such a problem for corporations like General Motors is that many of them were shortsighted when they established the plans. They convinced workers to accept lower wages in exchange for larger pensions, partly because benefits are not included on balance sheets and do not lower a company's net worth. As their employee ranks grew, the cost of funding the plans skyrocketed. Smaller companies with burgeoning staffs or volatile sales could suffer similar fates.

To play it safe, Tomassi invests Winfield's pension, which is managed by Morgan Stanley, in a conservative mix of stocks and bonds. He receives monthly reports from CCA and an actuary will revisit the plan annually. If the portfolio performs poorly in any given year, the company must invest more the next year. If it does well, the company will pay less. The plan cost $5,000 to set up and $5,000 a year to administer, in addition to Morgan Stanley's annual fee, which is 1.5 percent of the fund's value.

Tomassi says the benefit of having an outsize nest egg outweighs the cost--and the risk. "Retirement looks a little closer, and we've got the cash to put away," he says. "This is a key component of my exit strategy."


To learn more about pensions, go to the retirement section of the Department of Labor's website, which features a primer on the plans and tips on complying with federal laws governing retirement benefits.