In addition, on July 1 the managed care company will fully vest all employees who are not yet vested. This enhancement will apply to anyone who was a Cigna employee as of April 1.
Effective January 1, 2010, Cigna will sweeten its 401(k) plan in several ways. It will match 100 percent of employees’ deferrals, up to the first 3 percent of pay, and will match 50 percent of employee deferrals on the next 3 percent of pay.
It currently matches 50 percent of contributions, up to the first 6 percent of pay.
Cigna also will ease plan eligibility requirements so new employees will become eligible for a company matching contribution as soon as they join the plan; currently, employees have to complete one year of service before they are eligible for a matching contribution.
In addition, employees will fully vest in matching contributions after two years of service, down from the current five-year requirement.
Cigna, which estimates that the changes will result in annual savings of $40 million, noted that its retirement benefits plan package already was “significantly higher than the average package provided by our competitors. These actions bring our retirement benefits in line with those of our direct competitors.”
While the decision to freeze the cash-balance plan was “a difficult one,” the 401(k) plan enhancements will result in employees receiving “a total package of benefits and rewards that is very competitive,” the company said.
Philadelphia-based Cigna is the second large, well-known employer to announce a cash-balance plan freeze within the past week. Last week, Wells Fargo & Co. in San Francisco said it will freeze its cash-balance plan, also effective July 1.
Employers in large numbers have been moving away from all types of defined-benefit plans. Last week, Watson Wyatt Worldwide reported that only 45 of the Fortune 100 companies now offer a defined-benefit plan to new salaried employees. As recently as 1998, 90 percent of Fortune 100 companies offered a defined-benefit to new salaried employees.
Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail firstname.lastname@example.org.