According to Standard & Poor's, in aggregate, the companies that make up the S&P 500 would have to set aside $40 billion this year to catch up and fully fund their pension plans. That means the 300 or so companies in the S&P 500 that offer pension plans would need to contribute an average of $130 million-plus to bring their pensions into compliance with their statutory funding statuses.

The problem is that pensions do not allow companies to shrink because the obligation to retirees continually increases. Thus the news in the past few weeks has been of Ford's (NYSE:F) pension woes and IBM's (NYSE:IBM) decision to eliminate its pension plan after 2008 in favor of a 401(k) plan. All told, the Pension Benefit Guaranty Corporation (PBGC) projects that 75% of all pension plans that it guarantees are underfunded by a total of $95 billion. That the number is so high suggests one thing: It's not just the unhealthy companies that have pension problems.

A look at some big companies shows shocking deficits in their pensions. In 2003 I wrote that GM (NYSE:GM) actually needed to sell some $13 billion in stock to shore up its pensions, and lo and behold, it remains $7.5 billion in arrears. But problems at GM aren't likely to be a big shock -- many market wags predict the behemoth will file bankruptcy. More surprising might be the pension shortfalls at some companies performing quite well: $11 billion at ExxonMobil (NYSE:XOM), $3 billion at DuPont (NYSE:DD), $3 billion at Pfizer (NYSE:PFE), $2 billion apiece at Altria (NYSE:MO) and Alcoa. These are companies that are minting money at the moment, and yet they have massive underfunded obligations to their employees and retirees.

Fortunately the PBGC provides backup insurance in case pension funds go belly-up. Unfortunately, the PBGC is effectively insolvent itself.

There's one last big element. Sometime in the next year, the Financial Accounting Standards Board (FASB) plans to clean up some of the accounting mess in pensions by requiring companies to place their pension costs on their balance sheets. Many more companies are going to respond to this by doing what IBM has done -- replacing their pension programs with 401(k)s.

What does all of this mean? Well, effectively, companies are going to come under more pressure to bring some predictability to their retirement benefit costs, which is very difficult to do with pensions. So even companies that have the ability to fully fund a defined-benefit program are more and more likely to convert to defined contribution. For the companies listed above, with current pension deficits, the pressure will be even greater.

This means at some point in the near future, even if your company currently offers a pension, in some form or another it may be switched over to a 401(k). And you'll not only contribute to the funding for your own retirement, but also have to choose where to invest those funds. Naturally, as Fools, we'd be pretty excited about this. But most people have no idea how to invest.

Two simple words
Fortunately, there is a solution. You might not have heard about it if you're not an experienced investor. It's a way to take the decision making out of investing -- a perfect solution for someone who has neither the time nor inclination to manage a portfolio. It's called an index fund -- highly diverse baskets of the largest companies in the country. These vehicles roughly match the performance of the stock market, which over time has proved quite satisfactory to people who made the decision early on to buy an index fund and get on with their lives. Average may not sound great, but in the past 20 years that would have turned a starting investment of $1,000 into more than $10,500. What's more, average actually beats the performance of most mutual funds over that time.

It can be scary to see your defined-benefit programs go by the wayside, but I suggest that this is an inevitable trend. I'd be remiss if I didn't note that The Motley Fool offers a newsletter service run by our own retirement specialist, Robert Brokamp. It's called Rule Your Retirement, and in it you receive monthly tips and guidance on making sure that your golden years are just that -- golden.

Rule Your Retirement is available for one-, two-, and three-year subscriptions. Not sure? A free trial for 30 days is yours for the asking.

Bill Mann owns none of the companies mentioned in this article, though he does own Ford debt. Pfizer is a Motley Fool Inside Value recommendation. This message is sponsored by the Fool's disclosure policy.