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Aon Freezes Defined-Benefit Plan

February 9, 2009
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Related Topics: Financial Impact, Retirement/Pensions, Latest News
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Aon Corp. is freezing its defined-benefit pension plan, ending contributions to a defined-contribution plan it set up in 2004 and enhancing its 401(k) plan.

As of April 1, employees enrolled in Aon’s pension plan will stop earning benefits. That action by Aon, the world’s second-largest insurance broker, completes a process it started in January 2004 when it closed off the plan to new employees.

And as of January 1, Aon stopped making contributions to a defined-contribution plan that it had set up in 2004 to cover U.S. employees hired since January 1, 2004. Under that plan, Aon’s contributions were based on an employee’s length of service.

Also effective January 1, Aon enhanced its 401(k) plan, now matching 100 percent of employees’ salary deferrals up to the first 6 percent of pay. It had been matching 50 percent of employee contributions on the first 6 percent of pay.

A spokesman for Chicago-based Aon, which has about 37,000 employees worldwide, said the pension and savings plan changes were made to reduce costs and to base employees’ compensation more on performance.

Aon’s pension changes come amid sharply reduced earnings. For the fourth quarter of 2008, profits slid to $10 million from $207 million a year ago, while income from continuing operations fell 35 percent, to $123 million.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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