The $34 billion delivery company said the changes reflect accounting and funding rule changes, the Pension Protection Act’s provisions on cash-balance plans and automating 401(k)s, and shifting demographic trends.
Since last summer's Pension Protection Act established that cash-balance plans don't discriminate against older workers, MeadWestvaco said it would convert its traditional pension plan to a cash-balance plan and another company, Phoenix Cos., announced that it would convert its traditional pension plan to a pension-equity plan, another type of hybrid pension plan.
FedEx already had a cash-balance plan, instituted in 2003, in which it enrolled new hires. It had given existing employees the choice of switching to the cash-balance plan or staying in the pension plan. As of June 1, 2008, employees who are still in the traditional pension plan will begin accruing benefits under the cash-balance plan; they will not accrue additional benefits in the traditional plan but will be paid the benefits they have already accrued when they retire.
In line with the Pension Protection Act’s encouragement of automation in 401(k) plans, FedEx also said it will begin to automatically enroll employees in its 401(k) and automatically increase their savings rate each year. It will also add investment options and boost the company match to a maximum of 3.5 percent of an employee’s salary; currently, FedEx matches up to $500.
The company says that it does not expect the changes it is making to alter the amount it spends on employee retirement plans. A FedEx spokesman said the changes in retirement plans apply to 170,000
Separately, Goodyear Tire & Rubber Co. announced that it will freeze its defined-benefit pension plans for salaried workers at the end of 2008 and replace them with enhanced 401(k) benefits. At the start of 2009, Goodyear will begin matching 50% of the first 4 percent of pay that employees save in the salaried 401(k) plans.
Goodyear also said that it will redesign its retiree medical benefits, including increasing the contributions that retirees make toward the cost of those benefits.
Filed by Susan Kelly of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail firstname.lastname@example.org.