Benefits September 25, 2007

State Street Does DB to 401(k) Switch with Auto Enroll, Deferral Hikes

September 25, 2007 (PLANSPONSOR.COM) - State Street Corp. has announced plans to freeze its pension plan for its 15,000 workers in favor of a 401(k) plan with beefed up company contributions, auto enrollment and auto deferral increases.
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A Boston Globe news report said, as of January, the company will start matching 100% of the first 6% of annual contributions employees make to their 401(k), up from 50% currently.

Also, employees who don’t currently contribute will be automatically enrolled to save 3% of their pay, increasing at 1% a year to 6% of total pay, unless they opt out of the plan.

Nearly all 13,000 Massachusetts employees of State Street will be affected by the change, said spokeswoman Carolyn Cichon. For State Street workers, the shift to the 401(k) “will empower employees to plan for retirement, giving them greater flexibility,” Cichon told the newspaper.

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State Street previously had said it was studying the change. It won’t necessarily save the company money, Cichon said, depending on future results.

State Street also will add annual supplemental contributions to employee plans based on the company’s overall financial performance. Current retirees will continue to receive pension payments, Cichon said, according to the Globe.

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