(MONEY Magazine) – Not long ago, the stock market reigned supreme, CEOs were worshiped like baseball heroes, and Sept. 11 was just another day on the calendar. In those heady times, employers creatively enhanced their benefits packages to attract and retain the best possible talent. Now, this creativity takes a different spin. The new challenge: how to make less seem like more.

In response to a disturbing confluence of events--depressed earnings, skyrocketing costs, the threat of escalating war and the lingering aroma of corporate misbehavior--employers are struggling to sustain their generosity within the benefit cornerstones: retirement plans, health care, stock options and insurance. A few years ago, employees had remarkable bargaining power. We negotiated rich options packages, bigger bonuses and more paid time off. No more. Now, facing double-digit increases in health-care premiums and deflated retirement funds, employers are trying to contain costs and still take care of their own. "Companies today are under intense pressure to hold down their costs," says John Challenger, chief executive officer of international outplacement consulting firm Challenger Gray & Christmas. "They're facing tough choices about which benefits to keep and which to cut."

This year, MONEY's annual Best Benefits survey took a hard look at how these decisions threaten the financial well-being of working Americans. Weighing in at a hefty nine pages, our comprehensive survey explored what the nation's largest corporations are offering their salaried, nonunion, U.S.-based employees. Our investigation focused on the benefits that most directly affect the wealth and wallet of the employee. The survey was mailed to senior compensation and benefits executives at Fortune 300 companies. More than a third responded, which let us scrutinize the benefits enjoyed by more than 4.6 million Americans.

To analyze the data, we partnered with Milliman USA, an international benefits consulting firm. Drawing on their extensive industry knowledge, they created a complex suite of financial tools to distill the rankings. First, a team of benefits experts and actuaries from Milliman's Washington, D.C. office developed a proprietary algorithm that compared the benefits offered by the respondents. Utilizing a model we believe is relevant to MONEY readers, we looked at a specific employee profile: a married 50-year-old with two dependent kids and 10 years of service, who is earning $100,000 a year. And unlike our survey last year, where we ranked companies based on their dollar value at press time, this year's survey adds a twist: The calculations incorporate actuarial data that reflect likely real-life career outcomes for our hypothetical worker at each respondent firm.

"We took into account a wide array of career-path possibilities based on industry practices such as the likelihood of an early retirement and industry turnover statistics," explains Milliman's Jeff Lane. This information helped the Milliman team craft an apples-to-apples benefits comparison, incorporating real variables facing employees today. "As a result, the ranking serves two functions," adds Milliman's John Muehl. "It's a comprehensive listing of benefits offered by America's top corporations and a real dollar assessment of what these benefits are worth to an actual employee." To accomplish this, the Milliman team created a 100-point scoring system that compared the dollar values of the financial benefits listed earlier, as well as paid time off. (The list of the top 75 companies begins on the facing page.)

Now to the nuts and bolts. Because we view retirement planning as the foundation for any meaningful benefits plan, the highest possible score in that category was 42 points. (That number took into account both defined-benefit and defined-contribution plans.) Who snared the big points? Employers who offered generous 401(k) matches, profit-sharing contributions or both. Scoring for companies providing pensions was determined by how much income the pension replaced after 20 years of service--the higher the percentage, the higher the score.

And we gave points for relevant special features like the availability of lump-sum pension distributions, subsidized early-retirement options, a healthy array of investment options, 401(k) loans upon request, freedom to change allocations and the ability to manage accounts online.

Next, our number crunchers looked at health-care benefits. In a nod to spiraling health-care costs, companies that paid full benefits--dental and vision included--could earn 21 points. Those that picked up less of the tab scored less. Retiree medical benefits were also a significant consideration: If our Everyperson could expect subsidized coverage in retirement, we added up to 15 points.

We also assigned up to 17 points for generous paid time off. And although cash may be king these days, stock options still matter; nevertheless, because the cost is negligible to an employer, we assigned only one point to them. Similarly, long-term disability benefits earned one point.

The tale of the tape? Philip Morris is No. 1 in our survey for the fourth year in a row. The company's combination of a traditional pension with a profit-sharing contribution of 15% of pay (on average) is a big reason why. Pharmaceutical giant Schering-Plough earned second place, thanks to a similar profit-sharing contribution. Health insurance also played a role in the high scorers: Abbott Laboratories hit No. 3 in part by paying 90% of the eligible retirement health-care premiums for employees age 50 or more with at least 10 years of service. And the folks at American Express (No. 20 overall) are the most tanned, rested and ready, enjoying highest marks in the paid-time-off category.

With numbers crunched, our survey and reporting uncovered major trends in the two key benefit areas:

RETIREMENT BENEFITS

As the stock market continues to take a beating, so do the nest eggs that are depending upon it. In an unusual bright spot, pension plan participants have enjoyed a psychological buffer from the slings and arrows of market forces. But the lingering lessons of company-stock overload (like Enron) and continuing stock market woes have forced both plan sponsors and participants to weigh some difficult choices.

Defined-benefit plans. The bull market saw employees clamoring for the dream of wealth that only the stock market could bring. As a result, the traditional pension became the red-headed stepchild of retirement plans. Now the persistent market downturn has given the pension a new cachet, especially for people who are at or close to retirement. "Pension plans offer a lifetime annuity as a method of payment. You know what to expect, you know you're not going to outlast it," explains Ron Gebhardtsbauer, senior pension fellow for the American Academy of Actuaries. "Those of us with 401(k)s have learned about investment risk the hard way. If someone had all their money in company stock, you can't fix that."

But despite the renewed appreciation for the tried and true, don't count on the old-fashioned company pensions to fund your golden years. For one thing, they're too expensive to administer. Second: Market losses are forcing pension administrators to cough up some cash. "Plans were so well funded that they were booking income, year after year," explains John Ehrhardt of Milliman. No fuss, no muss, no additional contributions were needed from the employer. "Now companies are looking at cash requirements for the first time in 15 years." Also on the horizon: pension reform. Proposed federal regulations will mandate greater transparency in pension payouts, balances and administration. If plan managers are to keep their participants in the loop on the state of their pensions, then a spate of fiscal and communications challenges loom ahead. Throw in the looming boomer retirement wave, and even hard-core corporate supporters of traditional pensions are seriously eyeing less costly cash-balance and 401(k) plans.

That said, of the 109 companies in our survey, 85 offer a defined-benefit plan, of which 41 are traditional plans. (For the second year in a row, Northwestern Mutual, No. 8, has the most generous plan; retirees can expect over 50% of their salary after 25 years of service.) Breaking it down further, 38 companies offer cash-balance plans and five offer pension equity plans. Cash-balance plans, which are hybrids of defined-contributions and defined-benefit plans, offer an annual employer contribution based on a percentage of salary, which is invested on your behalf. Rather than drawing an annuity based on a percentage of your final salary, as in traditional pensions, cash-balance-plan payouts are based on how much is in your account at retirement. Pension equity plans are similar to traditional pension plans, but sometimes the payouts are lower.

Not surprisingly, the number of cash-balance plans offered by our survey companies has increased significantly--from 27% in 2001 to 44% in 2002. This year, however, the estimated average expected retirement benefit under these cash-balance plans was 40% less than the estimated retirement benefit that traditional pensions would provide our sample employee. Several survey respondents report that they intend to switch to cash-balance plans next year.

Defined-contribution plans. Again, some mixed results. On the positive side, all of our respondents offer a 401(k) or other defined-contribution plan or profit-sharing plan. Nearly all (100 of the 109 companies) offer automatic matching contributions on 401(k)s--the average employer match was 3.7% of pay for those employees who max out their contributions. And 41 companies kicked in either an additional discretionary match (based on company performance), a straight-out profit-sharing contribution or both. The average additional employer contribution was 5% of employees' salary.

But the steady pounding on their portfolios has left many employees reeling. "In a falling market, investment choice is a hot issue," explains Milliman's Bob Weatherford. Although only 22 of the companies surveyed allow for unlimited choice of investment funds, the vast majority allow employees to change their investment mix daily.

HEALTH CARE

Without a doubt, the rising cost of health insurance is the single biggest challenge facing employers today. The monthly premiums for employer-sponsored health plans for the average American family of four rose 16% from spring 2001 to spring 2002, according to a recent survey by the Kaiser Family Foundation. Similarly, we found that our Everyfamily experienced significant out-of-pocket increases since 2001: 28% for health maintenance organizations (HMOs); 23% for traditional fee-for-service plans and 21% for preferred-provider network (PPO) coverage, which lets employees seek care outside of the network for an additional fee. And only 88% of this year's companies provided subsidized dental coverage, down from 95% last year.

Rising health-care costs are the problem. Prescription drugs are the fastest-growing category of health spending; factor in medical breakthroughs, federal government mandates, litigation and an aging population, and you've got what Milliman's Peggy Pearson calls "a perfect storm of rising costs that may not abate any time soon." Anheuser-Busch was a standout in this category, earning points for low monthly employee contributions, low family deductibles and picking up the full dental premium.

Also hit hard: retiree medical coverage. Only 57% of our respondents subsidized this benefit, down from 72% in 2001. In the past five years, 16 companies have eliminated retiree medical coverage for new hires.

An unfortunate and complex set of realities has the largest corporations feeling a serious fiscal squeeze. Now and for the foreseeable future, our wallets will be feeling one too.