|By Dan Gearino, The Columbus Dispatch, Ohio|
Current employees will retain all of the benefits they have previously accumulated.
Instead of a defined-benefit pension, new employees will be offered a 401(k) savings plan, a version of which has previously been offered as a supplement to the pension. The switch will occur in January.
The changes will "balance associate benefits with what the company needs to secure its future," said
The drop in benefits is "a concern for all employees," said one longtime
The company is holding meetings with employees this month to explain the changes.
Under the current pension, employees receive annual pay equal to 2 percent of the base pay they received during their career with
With the new system, existing employees' pensions will drop from 2 percent to 1 percent for their remaining years with the company. They also have the option to forgo the 1 percent in favor of a 2 percent to 8 percent company contribution to a 401(k) savings plan.
A pension provides a monthly payment for as long as the employee is alive, while a 401(k) is more like a savings account. In most cases, a pension provides greater benefits.
The company has been making vehicles in
At the same time, private-sector employers have been phasing out pension plans. In its message to employees,
In the past few years, the greatest threat to pensions has been low interest rates, which have forced companies to pump additional money into retirement systems to guarantee the benefits, said
"Companies have seen their pension costs explode," he said. This has led to a financial climate that is "extremely stressful" to employers with pensions, he said.
The cost cuts by the Big Three U.S. automakers — Chrysler, Ford and GM — have eroded much of the cost advantage that
He estimates that
Considering this, and the larger trend away from pensions, he is not surprised by
"I think the handwriting is on the wall," he said. "The defined benefit is history."
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|Source:||McClatchy-Tribune Information Services|