Partly prompting the accrual change, according to a Sears spokesman quoted by Business Insurance, was that offering a defined benefit plan has become “an unacceptable risk” because of the volatility of the cash funding requirements.
According to the Business Insurance report, competitive pressures also played a part in the move since few of Sears’ competitors offering a defined benefit plan, making the provision of such a plan “competitively unsustainable,” the unidentified spokesman said. Additionally, employees increasingly are interested in more-portable benefit programs such as 401(k) plans rather than traditional plans, the spokesman told Business Insurance.
The latest move comes four months after a major pension plan change in which current workers 40 years old and older could choose between staying in the DB plan and a 401(k) program or opt instead for an enhanced K plan (See Sears Unwraps Compensation Changes ). New hires and those under age 40 had to migrate into the enhanced K plan.
Under the 401(k) plan that Sears will offer next year to all eligible employees, the company will match 100% of employees’ salary deferrals up to the first 3% of pay and 50% of employees’ pretax contributions on the next 2% of pay.
Other major employers that have, over the past year or so, moved away from defined benefit plans include Motorola Inc. (See Motorola Alters Pension Benefits for New Employees ), IBM Corp. (See Q/A: “Blue” Moves ), NCR Corp.(See NCR Phasing Out DB Plan ) and Aon Corp.