Atlanta-based athletic clothing and equipment maker Russell Corp. and communications giant Sprint Nextel Corp. have joined other employers across the country in migrating away from their DB plans.
In Russell’s case, the company made the announcement about its retirement benefit changes as part of a wide-ranging series of cost-cutting moves including cutting 2,300 jobs, which it said were aimed at saving as much as $40 million on a pretax, annualized basis.
Russell CEO Jack Ward offered no details of the retirement plan changes, except to say that the firm’s DB plan would be frozen that and Russell planned to “significantly improve” its existing K plan.
In the case of Sprint Nextel, the January 1, 2006 changes affected Sprint employees who had been with the company before the completion of its merger with Nextel Communications Inc. in August, David Gunasegaram, a Sprint spokesman, told the Kansas City Star. Nextel did not have a pension program.
“After considering the needs of the business, we made changes to the retirement program that places emphasis on the 401(k) program,” Gunasegaram told the newspaper. “It provides our associates with increased flexibility in managing their retirement and it positions our company for success in the marketplace.”
The changes mean that Sprint employees hired before the merger was completed on August 12 who were fully vested in the program will not earn additional pension benefits, Gunasegaram said. Employees hired before that date but are not yet vested in the program will be allowed to continue earning the needed five years or more of employment credit to become vested.
The company offers a dollar-for-dollar match for employee 401(k) plan contributions of up to 5%, Gunasegaram said, as well as a discounted stock purchase program for employees.
Part of a Trend
Earlier this week, Alcoa Corporation revealed that new hires after March 1, 2006 would only be offered a 401(k) plan (See Alcoa Drops DB Plan for New Hires ).
Other companies recently announcing changes in their DB plans have included:
- IBM, which announced a major redesign of its retirement plans, announcing plans to freeze current pension benefits, while significantly enhancing its 401(k) offerings, effective in January 2008 (See IBM Beefs Up 401(k), Backs Off DB – Come 2008 ).
- Northwest Airlines, where pilots have agreed overwhelmingly with a proposal to freeze their defined benefit plan and move to a defined contribution program (SeeNorthwest Pilots OK DB Plan Freeze).
- Textile giant Milliken & Co., which announced its 9,300 employees will no longer accrue pension benefits (See Textile Giant Announces Pension Plan Freeze).
- Verizon Communications Inc., which will freeze its pension plan for managers and increase matching contributions in its 401(k) plan instead (See Verizon Announces Pension Plan Freeze ).