Alcoa Drops DB Plan for New Hires
A company news release said the move would not affect current employees or retirees who would continue to have access to both the DB and the 401(k) plans.
Under the new plan, the company will make a
contribution of 3% of an employee’s annual salary and
bonus to the 401(k), whether or not the employee
contributes. In addition, the company will match the
first 6% of salary that an employee contributes to the
K plan.
“We have very competitive
benefit plans at Alcoa, and we periodically evaluate
the level of competitiveness to ensure our plans are in
line with the marketplace,” said Paul Thomas, Executive
VP, People, ABS, and Culture, in the news release. “We
will move to a defined contribution system for new
hires – a contribution to a 401(k) plan of 3% of salary
and bonus, in addition to our match programs on the
first 6% contributed – that gives employees significant
flexibility and portability of their retirement
savings.”
The changes will not impact
current Alcoa employees or retirees. “We will continue
to monitor the marketplace and make appropriate
modifications to our benefits programs that maintain
our competitiveness,” said Thomas. While the
elimination of the defined benefit plan for new hires
will limit long-term liability for the company, there
is no immediate impact on the company’s
profitability.
Workers covered by collective bargaining units and certain non-bargained hourly workers are also not impacted by the change, Alcoa said.
A Continuing Trend
Other companies announcing changes in their DB plans include:
- IBM, which announced a major redesign of its retirement plans, announcing plans to freeze current pension benefits, while significantly enhancing its 401(k) offerings, effective in January 2008 (See IBM Beefs Up 401(k), Backs Off DB – Come 2008 ).
- Northwest Airlines, where pilots have agreed overwhelmingly with a proposal to freeze their defined benefit plan and move to a defined contribution program (SeeNorthwest Pilots OK DB Plan Freeze).
- textile giant Milliken & Co., which announced its 9,300 employees will no longer accrue pension benefits (See Textile Giant Announces Pension Plan Freeze).
- Verizon Communications Inc., which will freeze its pension plan for managers and increase matching contributions in its 401(k) plan instead (See Verizon Announces Pension Plan Freeze ).