(MONEY Magazine) – Five years ago, Vi McAllister was the benefits administrator for Superior Oil in Houston and was closing in on a comfortable retirement. She planned to call it quits and collect a full pension when she turned 60 in 1993. And since giving retirees cost-of-living increases was becoming standard in the oil industry, she fully expected that her pension would be adjusted periodically to keep pace with inflation. But McAllister's dreams were dashed when Mobil Corp. acquired Superior in 1984, closed down Superior's overfunded pension plan and scooped up $46 million in surplus assets. Mobil was required by law to pay out only the benefits that employees and retirees had accrued under Superior's plan, so it bought annuities for them. The results were far from generous. Unhappy with being thrust into a giant corporation, McAllister left Mobil in 1986 and started collecting $518 a month when she turned 55 last year. That's only a third of what she would have received had she worked at Superior as long as she had planned. What's more, she says, ''the annuity I received for the benefits I earned under Superior's plan is frozen forever, so it'll lose value as my cost of living increases.'' And annuities aren't guaranteed by the government as pensions generally are. More than 2 million employees and retirees share McAllister's fate. They were participants in the nearly 2,000 pension plans that have undergone ''reversions'' since 1980 as employers sought to get their hands on nearly $20 billion in surplus assets. Terminations for reversions peaked at 582 in 1985, as employers rushed to raid plans before a 10% (now 15%) excise tax on recaptured assets took effect the next year. Another 166 plans closed down last year, though the Treasury Department temporarily halted terminations for reversions from last Oct. 22 to May 1, 1989. Whether shutdowns will surge again is anybody's guess, but tough bills have been introduced in Congress to encourage employers to replace trashed pensions with similarly generous ones. If you think your employer intends to abolish your pension plan, there's little you can do to protect your retirement benefits. Should you already be retired when your former employer raids your plan, you'll be stuck with an annuity that pays out a forever-fixed amount. To safeguard your purchasing power, you should then put 10% to 20% of any retirement nest egg you have outside your pension plan into conservative growth investments such as total- return mutual funds or blue-chip or utility stocks, says financial planner Judith Headington McGee of Spokane. If you are still employed when your pension plan folds, the benefits you eventually collect may be higher, lower or the same as you expected. Your fate depends on the type of replacement pension plan you get. Employers have four choices: -- Complete a spin-off. Companies such as Exxon and Goodyear have separated retirees from their present pension plans but continue to cover employees under them. Employees' future benefits are safe, but pensioners may get less in the long run by losing cost-of-living increases. -- Terminate a pension plan and establish another one. If you are still working, you will probably fare best if this happens, because your employer shoulders all investment risk. You could collect less than you expected, however, if the new plan requires you to work longer to earn a pension or uses a less generous formula to calculate benefits. Firestone Tire & Rubber and Beneficial Corp., for example, have re-established pension plans, but many employers have lately turned to other options. -- Set up a defined-contribution plan. Under profit-sharing, stock-purchase, thrift or 401(k) plans, investment risk is shifted to employees. A&P, Merrill Lynch and a growing number of other companies have adopted this option to replace traditional pensions, known as defined-benefit plans. (See the charts on page 187.) How well you do under a defined-contribution plan depends on your age, how much you contribute, whether your savings are matched by your employer and how well your investments perform. Younger workers may have an edge because they have more time to build up assets and can take their money with them if they change jobs. -- Don't replace the discontinued plan. National Gypsum and Times Mirror Co. are just two of the companies that recently decided not to replace terminated pension plans. When this occurs, employees take a devastating hit because they receive only the benefits they accrued under the old plan. A 1986 Labor Department study of six such cases concluded that average losses in expected benefits ranged from 33% to 70%. In such a case, you can either look for a new job at a company that has a pension plan or start your own tax-deferred retirement savings program with an Individual Retirement Account or a tax-deferred annuity.

CHART: NOT AVAILABLE CREDIT: Source: Pension Benefit Guaranty Corporation CAPTION: How employers replace discontinued plans Defined benefits, once the preferred replacement vehicle, are losing out to defined contributions.