Aloha Airlines' decision to terminate its pension, which was approved by its largest union this week, puts the carrier in the company of a growing number of employers who are getting out of the business of managing retirement money for workers.

In Aloha's case, the bankrupt company plans to turn its pension responsibilities over to a federal agency that promises to pay most of Aloha's obligations. Many other Hawai'i and Mainland companies are switching from pensions to retirement plans that give employees the right and responsibility to manage their own accounts.

"It's a very common employer trend," said James Starshak, an attorney specializing in retirement plans with Honolulu law firm Carlsmith Ball LLC. Stock market downturns at the end of the tech bubble in 2000 caused many companies to re-examine their pension programs as returns on pension trusts plummeted.

Employees are increasingly having to plan for retirement without traditional pensions. A generation or two ago, pensions were considered a standard benefit of working for a large company.

Now even financially sound Hawai'i companies have been moving away from pension programs, or defined-benefit programs, to avoid the high costs.

They are shifting to defined-contribution plans, in which the company contributes to a retirement fund managed by the employee. The most common of these is the 401(k) plan.

Pensions were developed at a time when employees tended to stay longer at companies, said David Kirkeby of Pacific Islands Financial Management. These days, younger workers see 401(k)s as being attractive and like getting the annual statements showing how much they've got, he said.

Switching from pensions to 401(k)s "is a trend. Absolutely," Kirkeby said.

One of the benefits of a 401(k)-type retirement plan is that the employee gets the company's contribution up front and is less likely to be affected by a company failure or sale that could lead to it abandoning pension obligations.

Aloha has asked its unions and the U.S. Bankruptcy Court to approve new contracts that terminate its traditional pension plans and hand them over to the Pension Benefit Guaranty Corp., the federal agency that insures basic pension benefits.

The list of companies that have recently turned over pension plans to the PBGC contains many familiar names, including bicycle maker Huffy Corp., United Airlines and Kaiser Aluminum Corp.

On Monday, Aloha won approval for terminating its pension from members of the International Association of Machinists and Aerospace Workers, which represents 2,400 of the airline's 3,100 unionized workers.

The union also agreed that employees will pay a share of their health insurance premiums, which are currently fully covered by the company. Future retirees will also no longer receive medical benefits but can stay in the company plan at their own expense for 10 years, as part of the new contract.

"Most of us old-timers are disappointed because we worked more than 30 years and hoped that at the end of our careers we'd have something more," said Clyde Miura, a 32-year Aloha Airlines employee and 'Aiea resident. Still, Miura said he voted for the contract because he felt that it's needed to keep the airline flying and preserve company jobs.

"A job is better than nothing," he said.

At least 15 Hawai'i companies have turned over their pension responsibilities to the Pension Benefit Guaranty Corp. as costs soar, according to the PBGC.

"In one real respect, if the cost gets so large and the employer goes out of business, no one is going to benefit," said lawyer Starshak.

Aloha said the new labor agreement is crucial to its plan to emerge from bankruptcy protection by the end of the year. Aloha, which filed for bankruptcy protection last December, is in the process of being sold to an investment group that includes former football star Willie Gault and California billionaire Ron Burkle's Yucaipa Companies.

"These are very difficult times for the airline industry, and I am extremely proud of our Aloha employees who are truly making personal sacrifices to keep moving our company forward," said Aloha CEO David Banmiller.

"To date, 80 percent of the total work force is on board with the company's plan of reorganization."

Aloha's proposed contract also stipulates that employees with less than 23 years of service can accrue no more than 200 hours (or about 25 days) of vacation.

Wages are not affected by the new contract.

The contract changes require the approval of Bankruptcy Judge Robert Faris.

The airline, which plans to emerge from bankruptcy protection by January, said in its court filing that concessions by the International Association of Machinists and Aerospace Workers will save more than $10 million during the next five years, with about $7 million of those savings coming from the termination of the union's defined-benefit plans.

Overall, Aloha hopes to save $36.6 million to $58.8 million by terminating pensions. Most of the savings would come from terminating the pilots' pension.

Aloha is holding talks with its pilots and flight attendants, who oppose the company's plan to eliminate its pensions.

Unlike the machinists and other union members, some of the most senior pilots stand to lose up to half of their monthly retirement pay if their pension benefits are turned over to the federal agency. The agency caps pension payments at a level well below what pilots have been promised by Aloha.

Ben Wong, a customer-service agent and Aloha employee for 32 years, said he's aware that he won't get what he thought he would when he retires, but believes the new contract agreements are necessary to keep Aloha flying.

"I'm still smiling. I still have a job, although it's not something I like going through," the Hawai'i Kai resident said. "I've seen a lot of ups and downs, and this is probably the worst it's been. But I don't want to stress out about it."

Reach Rick Daysog at rdaysog@honoluluadvertiser.com and Greg Wiles at gwiles@honoluluadvertiser.com.