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Dow Adopts Cash-Balance Plan

July 18, 2007
Related Topics: Retirement/Pensions, Benefit Design and Communication, Latest News

The Dow Chemical Co. is adopting a cash-balance pension plan for new employees, making it the largest employer to do so since Congress passed legislation last year that protects new cash-balance plans from age discrimination suits.

Under the plan, which will be offered to U.S. salaried employees hired as of January 1, 2008, employees will receive annual credits equal to 5 percent of pay, and their cash-balance accounts also will be credited with interest. Employees will be able to take the value of their account as a lump sum when they terminate employment, a portability feature Dow said it believes will appeal to its workforce.

Employees “want to be able to take the funds with them if they choose to leave the company. That’s exactly the need our new program satisfies and why we’re taking this next step in our benefits evolution,” Janet VanAlsten, Dow’s global benefits director, said in a statement.

Additionally, as a career-average pay plan, benefits accumulate more evenly in a cash-balance plan compared with other types of defined-benefit plans, and employees also value that feature, VanAlsten said. Under Dow’s current pension plan, benefits are based on employees’ length of service and three highest consecutive years of compensation.

Dow is at least the third major employer—and the first Fortune 50 company—to adopt a cash-balance plan since the enactment of legislation last year that protects new cash-balance plans from age discrimination suits as long as certain conditions are met.

Other employers that have adopted cash-balance plans since the passage of the Pension Protection Act include MeadWestvaco Corp., a Richmond, Virginia-based paper packaging and office products producer; and Atlanta-based SunTrust Banks Inc. In addition, package delivery giant FedEx Corp. of Memphis, Tennessee, expanded an existing cash-balance plan.

Midland, Michigan-based Dow, which last year had sales of just over $49 billion, also will stop providing retiree health and life insurance coverage to employees hired after January 1, 2008. However, employees will be given the opportunity to make contributions to what Dow calls a Retirement Health Care Assistance Plan, with Dow fully matching employees’ contributions.

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

Related story: Court: Verizon Cash-Balance Plan Not Age Discriminatory  

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