Yet another major company is phasing out its traditional pension plan.
Aluminum giant Alcoa announced that it will eliminate its defined benefit pension plan for most new U.S. salaried employees effective March 1. In its place, the company will offer a more generous 401(k) defined contribution plan for new hires.
The company, one of the 30 that comprise the Dow Jones Industrial Average, added that the changes will not affect current employees or retirees, who will continue to participate in their existing defined benefit pension plans and defined contribution savings plans.
“We have very competitive benefit plans at Alcoa, and we periodically evaluate the level of competitiveness to ensure our plans are in line with the marketplace,” said executive vice president Paul Thomas, in a statement.
Under the new plan, the company will make a contribution of 3 percent of an employee’s annual salary and bonus to the 401(k), whether or not the employee contributes. In addition, the company will match the first 6 percent of salary that an employee does contribute. “That gives employees significant flexibility and portability of their retirement savings,” Thomas added.
The company stressed in its press release that 65 percent of employers now have a 401(k) plan as their primary retirement vehicle.