The Dow news release with word of the changes said the new program is slated to go into effect in 2008. According to the announcement, benefits for new employees hired after that date will be:
- Dow will contribute 5% of pay annually into a Personal Pension Account, plus interest. Employees will be able to take the value of their pension account as a lump sum whenever they leave the company. The pension vesting requirement is three years. The company’s existing defined benefit plan is being closed to new workers.
- Dow will implement an auto enrollment feature under which employees will be defaulted to a 3% deferral to be invested in a Barclays lifecycle fund. The company will also offer a new Roth 401(k) feature in addition to its existing contribution options.
- Eligible employees may put aside dollars to pay for medical premiums in retirement as part of a Retirement Health Care Assistance Plan. Dow will match these employee contributions dollar for dollar. Employees hired after January 1, 2008 will not be eligible for retiree medical and retiree life insurance.
According to the press release, Dow began to evaluate its benefits last summer after the passage of the Pension Protection Act. “The company chose this new method of retirement delivery because it allows Dow to maintain its benefit at a competitive level yet dampen pension expense volatility,” Dow said in the announcement.
The changes to the pension plan do not affect current eligible U.S. retirees or active U.S. salaried employees hired before 2008, the company said.