In a groundbreaking move to reduce Ford Motor's pension obligations and related balance-sheet volatility, the company said it will offer salaried retirees and former salaried employees lump sums in lieu of future pension payments.

“This involves retirees in a plan that's not terminating,” says Mike Archer, leader of intellectual capital for the North American retirement practice of consultancy Towers Watson, pictured at right. “We're unaware of any other large plan that has done this.” Other organizations have offered lump sums to former employees who are vested in the pension plan but not yet retired, he says.

Whittling down pension obligations will make it easier for Ford to manage them, Archer says. “The size of pension obligations that they have requires them to spend an awful lot of time managing those obligations,” he says. “A strategy that helps Ford make the obligation smaller is one that long term will help them make the success of the organization more fully dependent on how they do in the core business than how they do in managing their pension obligations.”