FedEx will stop offering a guaranteed pension for new hires, replacing it with an expanded 401(k) it believes will make it more competitive in the recruitment marketplace.

Under the new plan, which will be launched at the start of 2021, the shipping giant will contribute up to 8% of employee salaries, if employees contribute 6% of their salary. The current 401(k) matches up to 3.5% of salaries.

“As we continue to evolve FedEx retirement benefits to remain competitive, we recognize that more and more people understand the value of a 401(k) structure,” FedEx human resources executive Judy Edge said in a memo to employees.

Patrick Fitzgerald, a FedEx spokesman, said the change isn’t intended to save money. “It’s really more about evolution of our benefits and being competitive as an employer,” he told the Daily Memphian.

As The Wall Street Journal reports, “FedEx is part of a shrinking group of U.S. companies still allowing employees to accrue traditional pension payments.” Its chief rival, United Parcel Service , closed its pension plan to new workers in 2016.

“We’ve looked at the statistics out there,” Fitzgerald said. “Only 22% of Fortune 50 companies continue to offer pensions, and 11% of transportation companies offer a pension plan to new employees.”

The changes won’t affect the pensions of current employees, unless they opt to stop accruing benefits in the guaranteed pension plan and choose the new 401(k) instead.

FedEx has contributed $1 billion to its U.S. pensions plans this fiscal year and last fiscal year to increase plan assets. It had a pension deficit of nearly $4 billion and obligations of $28.9 billion at the end of its fiscal year ended May 31, 2019.

Trip Miller, managing partner of Gullane Capital Partners, said FedEx’s decision makes sense from a shareholder perspective and in the context of updating employee benefits. “The old historical pensions and defined benefit plans of yesteryear are slowly going away and fading, and I think it’s just more of a reality, whether it’s FedEx or anybody else,” he said.

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One response to “FedEx to Discontinue Pension Plan for New Hires”

  1. I’ve got an idea. Slash C level salaries, bonuses, stock options, instead of hurting the average person who works for FedEX.

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