The Columbus Dispatch reports that, beginning in January 2014, new employees will be offered a 401(k) retirement plan instead of a pension, with Honda citing a need to cut costs and secure its future.
Honda opened its first plant in Marysville, Ohio, in 1979. Currently Honda has approximately 28,000 employees in the U.S. and 4,000 retirees. As the company has grown, its retirement benefits have become a major expense.
With the new system, existing employees’ pensions will drop from 2% to 1% for their remaining years with the company. They will also have the option to forgo the 1% in favor of a 2% to 8% employer contribution to a 401(k) savings plan. Honda is also changing the way it handles early retirement and retiree health insurance, shifting to plans that will provide less generous benefits. Current employees will retain all of the benefits they have previously accumulated.
Jeffrey Smith, a Honda spokesman, said the new retirement plan should be viewed as more of a shift than a reduction in benefits.
Smith said the company will hold meetings with employees this month to explain the changes.