Motorola Alters Pension Benefits for New Employees

March 25, 2005 ( - Motorola Inc. has joined a growing number of companies who are offering new employees 401(k) plans instead of their traditional defined benefit plans.

In a filing with federal regulators, the world’s second-largest mobile phone maker said that it would only offer 401(k) plans – and not a defined benefit and 401(k) plan – to employees hired after January 1. Both older and newer 401(k) participants have employer matches, but the company said that the match for new employees would be more significant, according to the Chicago Tribune.

New employees also won’t be eligible for retiree health care coverage, according to the company. The company expects to pay $35 million on such costs for this year alone. For pension expenses, this figure is expected to be $173 million.

The move by Motorola is in line with many other companies as of late. According to a Kaiser Family Foundation and Hewitt Associates survey, 8% of companies eliminated their retiree health benefits for future employees in 2004, while 11% said they were likely to do so in the future (see Employers Keep Cost Shifting Health Expenses to Retirees ).

The Motorola changes were made after a review of the company’s and its competitor’s pension plans, and were done for “overall cost savings”, according to the Tribune.