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 editors@workforce.com.
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