According to The Lutheran, in 2005, the Augsburg Fortress board of trustees took action to freeze the defined benefit plan and began offering a 403(b) plan to its employees. The DB plan termination affects 500 employees; 150 participate in the 403(b).
Beth A. Lewis, president and chief executive officer, Augsburg Fortress, Minneapolis, said in an interview with the ELCA news service that the DB plan “has been underfunded for about nine years.” In information sent to participants, the publisher said that as of December 31, 2009, the plan’s retirement benefit obligations totaled about $24.2 million, and the plan’s assets were only $8.6 million.
In a letter to participants, Lewis said the trustees amended the plan to provide for a “more equitable allocation of plan assets among plan participants.” Without the amendment, more than half of the plan participants would have received nothing at all, she told the news service.
The company said other options to fund the shortfall were considered, such as trying to find sources of external funding, declaring bankruptcy and selling company assets, or taking no action, according to The Lutheran, but the board decided terminating the plan and amending it to spread assets more equitably was “the best of the hard choices facing us.”
The 403(b) plan gives employees the option to contribute and the organization the option to match those contributions, and allows participants to determine how their retirement funds are invested.