Hewlett-Packard Co. is
phasing out its defined-benefit pension plan, completing the process it started
a year ago when it closed the plan to new and younger employees.
After December 31, plan
participants no longer will earn benefits in the DB plan. Instead, they will be
eligible for an enhanced 401(k) plan match.
HP’s action is the second
step the Palo Alto, California-based technology giant has made to wind down the
plan. In January 2006, HP closed its pension plan to new and younger employees
and offered those individuals a beefed-up 401(k) plan in which the company
matches 100 percent of employees’ 401(k) salary deferrals up to 6 percent of
pay.
Employees whose combined
age and service were at least 62 remained in the DB plan and a 401(k) plan in
which HP matches 100 percent of employees’ salary deferrals up to the first 3
percent of pay and 50 percent of employees’ pretax contributions on the next 2
percent of pay. Starting January 1,
2008, those individuals will move to the enhanced 401(k) plan.
HP said the changes are
"consistent with actions being taken by many of HP’s industry peers and other
large corporations."
Other companies that have
deployed a two-step approach to phase out their defined-benefit plans include
IBM Corp. of Armonk, New York; NCR Corp. of Dayton, Ohio; and Sears Holding
Corp. of Hoffman Estates, Illinois.
Filed by Jerry Geisel of Business Insurance, a
sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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