According to a press release, the company is closing its defined benefit pension plan to new employees hired on or after January 1, 2007. Current employees’ pension balances will be maintained, but the new design results in a reduced rate of future benefits based on both age and service.
Benefits will also be reduced for executives participating in the company’s Supplemental Executive Retirement Plan (SERP), which will be redesigned as a defined contribution SERP, the release said.
Meanwhile, Hershey plans to increase company contributions to its 401(k) plan, with a match of 75% of up to 6% of pay contributed by employees. In addition, the company will make a contribution to the 401(k) plan for employees hired on or after January 1, 2007, whether or not they contribute to the plan.
“The changes announced today will help us better manage increasing benefits costs over the long term. At the same time, thanks to the enhancements we’re making to our 401(k) plan, these changes will improve our ability to offer a competitive, attractive and sustainable retirement benefit to our current and future employees,” said Marcella Arline, Senior Vice President, Chief People Officer, in the release.
Hershey is the latest in a long line of companies shifting focus to defined contribution plan offerings (See Apparel Company Joins Line of Cos. Freezing DB Plans ).