Effective July 1, employees no longer will earn benefits in the plan. Wells Fargo also is freezing the cash-balance plan sponsored by Wachovia Corp., a Charlotte, North Carolina-based bank Wells Fargo acquired last year.
Wells Fargo will continue to match 100 percent of employees’ 401(k) plan salary deferrals, up to the first 6 percent of pay.
Wells Fargo said in a statement that the decisions to freeze the plans were “difficult” but that it is “confident that we’re taking the right steps to ensure the long-term strength of our company.”
It also said that the 401(k) plan “is one of the most beneficial tools” for employees to save for retirement.
San Francisco-based Wells Fargo, which ranks at No. 41 on the Fortune 100, joins several other large, well-known companies—including Boeing Co., IBM Corp. and Verizon Communications Inc.—that have announced during the last couple of years that they are phasing out their cash-balance plans.
Some benefits experts predicted that cash-balance plans would make a big comeback after Congress made clear in a 2006 law that the plans’ basic design does not discriminate against older employees, ending uncertainty about cash balance plans’ legal status.
While a few major employers, including most recently Coca-Cola Co., have adopted cash-balance plans since the 2006 law, such startups have been outnumbered by other big employers’ decisions to phase out the plans. Such changes are part of a larger trend of employers moving away from all types of defined-benefit plans.
Cash-balance plans are so named because employees’ accrued benefits are communicated as a cash lump sum rather than as an annuity payable at retirement.