According to the announcement, effective January 1, 2007, future benefits in Aon’s US DB plan will be calculated based on a “career average pay” formula instead of a “final average pay” formula. The change is anticipated to affect approximately 11,000 active employees covered by the US plan. In addition, the firm said it has proposed for board approval that future benefits based on salary and service be stopped for employees in its UK plan.
“We believe these changes will help Aon better manage its overall future compensation cost structure,” said Greg Case, Aon president and CEO, in the announcement. Case said the company’s merit-based reward programs will receive increasing company contributions in the future.
The changes are expected to save Aon approximately $60 million in annual expense.
The US DB plan was closed to new members as of January 1, 2004 and the UK plan was closed to new members as of January 1, 1999.