The Akron, Ohio-based company announced in a press release Wednesday that it would freeze its salaried pension plan as of December 31, 2008 and replace it with 401(k) plans with varying levels of company matching contributions for current employees starting January 1, 2009.
For example, the company said the match for the salaried 401(k) plan would be 50% of the first 4% of pay starting January 1, 2009.
Goodyear also announced a variety of benefit plan changes effective January 1, 2008, including:
- increasing the amounts that current and future salaried retirees contribute toward their medical benefits;
- redesigning retiree medical benefit plans to minimize cost impact on premiums;
- closing the company’s Medicare supplement plan to new workers; and
- discontinuing company-paid life insurance for salaried retirees.
“These changes allow us to continue to provide the kind of compensation packages that are competitive and will attract and retain talented associates,” said Kathleen Geier, senior vice president of human resources, in the news release. “They are also consistent with our goal of reducing costs in excess of $1 billion by the end of 2008.”
The company plans to record a first-quarter charge of $65 million for those actions, which it expects to reduce the pension obligation by about $100 million and other post-retirement benefits by $525 million, according to the announcement.
Details of the plan changes will be directly communicated to the affected salaried associates and retirees over the next several weeks, the company said. Goodyear employees will be able to access online retirement modeling tools and investment education sessions to help with pension and benefit decisions and to plan for the impact of these changes.
About 14,000 active salaried workers will be affected by the pension and health care changes and 17,000 retirees by the changes to the health programs, Goodyear said.
Goodyear’s announcement came one day after FedEx Corp. said it would cap its traditional pension plan at the end of May 2008 in favor of offering employees what it calls a portable pension account (See PPA and Accounting Regulations Prompt FedEx Retirement Plan Changes ).