Fidelity Investments, the biggest U.S. mutual fund company, says it will do away with its traditional pension plan for about 32,000 of its workers in order to offer them a retiree health reimbursement plan and a beefed up profit-sharing plan.

“The pension plan was a relatively small component of our overall retirement savings program,” says Fidelity spokeswoman Anne Crowley. “The cornerstone of our retirement savings program is our profit-sharing plan.”

The profit-sharing plan has two components—an annual profit-sharing contribution Boston-based Fidelity makes to employees and Fidelity’s dollar-for-dollar match of its employees’ 401(k) contributions, the spokeswoman says. Fidelity currently matches up to 5 percent of employee 401(k) contributions.

In doing an analysis of benefits, Fidelity identified a “significant gap” in that it didn’t have a health care component for retirees, Crowley says.

“We have a very generous health care plan when we’re employed, but there was not a health care component for you when you retired,” she says. “In light of that and our own studies which showed this week that a couple reaching 65 will [need] $215,000 to fund health care costs in retirement, we felt it was a significant gap that needed to be addressed.”

Under the new plan, the 401(k) plan match will rise to 7 percent and profit-sharing contribution will continue, Crowley says.

The pension plan will be terminated May 31, and employees of Fidelity for a year or more will immediately become vested.

Employees can receive the accrued benefits either in a lump sum that they can roll into their profit-sharing plan where they can direct investments, or they can choose to take it in an annuity, which will provide them with a lifetime annual payment in retirement, she says.

Current retirees will continue to receive the same monthly pension distribution, but it won’t come from the Fidelity pension plan, Crowley says.

Filed by Kathie O’Donnell of Investment News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.