Package delivery giant FedEx Corp., which at the start of 2008 increased its 401(k) plan matching contribution, is now suspending the match.
Citing difficult economic conditions, Memphis, Tennessee-based FedEx said Thursday, December 18, that it would suspend its 401(k) plan match for a minimum of one year starting February 1, 2009.
At the start of 2008, FedEx increased company matching to 100 percent of employees’ salary deferrals on the first 1 percent of pay and 50 percent of deferrals on the next 5 percent of pay. Previously, FedEx’s matching 401(k) contribution was capped at $500 a year.
The increase of its 401(k) plan match came in conjunction with a redesign of the company’s defined-benefit plan. In 2003, FedEx adopted a cash-balance plan, offering it to employees hired on or after June 1, 2003. At the time, current employees were given a one-time choice of shifting to the cash-balance plan or remaining in FedEx’s traditional pension plan. (For more, read "Rethinking the Company Match.")
In 2007, FedEx announced that effective June 1, 2008, employees who remained in the traditional plan would earn future benefits through the cash-balance plan. It was at that time that FedEx also announced the increase of its 401(k) plan match.
According to president and CEO Frederick W. Smith, FedEx is being challenged “by some of the worst economic conditions in the company’s 35-year operating history,” and cost-reduction steps, including the suspension of the 401(k) plan match, are necessary.
Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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