Under the changes, approved on Friday, Hartford’s defined benefit pension plan will shift all employees hired before January 1, 2001, from a final average-pay formula to a cash-balance formula, effective January 1, 2009, according to Dow Jones.
Pension benefits for all Hartford Financial employees hired on or after January 1, 2001, already are calculated based on a cash-balance formula, the company said.
Hartford Financial said it expects that beginning next year, the pension-plan changes are expected to “materially reduce” the rate at which its annual pension expenses are expected to increase.
As of December 31, 2002, the company’s pension-benefit obligation was $2.6 billion. Assuming that the pension-plan changes were approved at the end of 2002, the company said it expects its pension-benefit obligation at that point would have been reduced by 10%, according to the report.
The company said it can’t currently calculate its pension benefit obligations for December 31, but said it is possible that the reduction in the pension-benefit obligation from the changes may be offset by increases as a result of changes in other factors underlying the calculation.
Dow Jones said Hartford will put about 20,000 of its employees, or 70% of its overall workforce, into the cash-balance plan starting in 2009. About 30% of its employees are already covered by the plan.
“We’re waiting five years to activate the changes to give people time to understand it and the impact on their retirement, and to give them time to plan ahead,” Hartford spokesperson Joyce Willis said, according to the report.