The new DB plan at The Phoenix Companies will have a different benefit formula while the 401(k) plan will have a higher matching contribution, according to a Hartford Courant news report.The new program means that employees will have to rely on their 401(k) for a larger proportion of their retirement benefits and will get a smaller proportion from the DB plan.
The current DB program calculates benefits using 2% of an employee’s final years’ average pay, multiplied by years of service and the benefit is paid in an annuity. The current plan includes incentives to retire at age 55.
According to the Courant, the new DB plan uses
credits to encourage people to stay longer ranging from a
2% annual credit for each year up to four full years of
service to a 14% annual credit for each year for those at
the company for 20 or more years.
Also, according to the report, the new plan also now includes bonuses along with base salary in benefit calculations and a provision for a lump-sum distribution when employees leave.
Meanwhile, employees who go into the new pension plan will be eligible for a bigger company match on their 401(k). The maximum company match will range from 4.5% of base pay for less than five years of service to 9% for 15 or more years of service. Phoenix currently matches as much as 4% of pay: 100% of the first 3% of pay and half of the next 2% of pay.
The new arrangement, which takes effect July 1, would affect most of Phoenix’s 1,500 employees, although some will have the choice of sticking with the old pension plan. Employees will keep any benefits already earned under the current pension plan, and those 50 or older, who have worked at Phoenix for 10 years or more, can choose whether to stay in the old pension plan or move into the new one, according to the news report.