Dupont puts a halt to pension plan contributions for active employees
- DuPont will no longer make contributions to active employees’ pensions plans, reports USA Today. The decision affects retirement for 13,000 workers, but only in the US and Puerto Rico. DuPont closed the pension plan to new employees in 2007. Employees will keep any benefits they earn, a federal mandate, but no longer accrue any until some point in November 2018 or until DuPont’s $130 billion merger with Dow creates one company. Retirees’ pension plans are not affected.
- Also, DuPont will drop health benefits, including dental and life insurance plans, for employees 50 and under when pension contributions stop in 2018. The company expects to save $50 million in pension-plan maintenance once contributions stop. The phaseout of contributions is considered a new cut and not part of the $700 million reduction in the budget that the company hoped to make by year’s end, says USA Today.
- DuPont projects that the changes will cut its long-term obligation to employee benefits by $550 million. The result would be a $380 million pre-tax gain in the fourth quarter.
When DuPont closed its pension plan to new employees, it reduced its contribution by two-thirds, says USA Today. DuPont’s contribution to the 401k is 9%. Neither the 401k plan nor health savings accounts will be affected by the changes. The company did what many employers have already done and that is to phase out defined pension plans and sponsor 401ks in their place. By ensuring some type of retirement plan for employees while delivering significant savings in retirement benefits costs, companies can strive for a win-win situation.
Drexel University's Norman Stein, a pension and employee benefits law professor, said that DuPont’s changes will hurt older, long-term employers because defined benefits plans usually "reward longevity and loyalty," reports USA Today. But, with millennials making up most of today’s workforce and being less inclined than previous generations to stay with one employer for several years, they’re also less likely to object to the switch from defined benefit retirement plans to 401k plans.