Fidelity Investments Drops Company Pension Plan
STEVE INSKEEP, host:
An investment firm will restructure pension plans for more than 30,000 people. You probably know that many businesses are moving employees out of old-style pensions in favor of 401k plans. Those are the plans where you're not guaranteed any particular settlement at retirement but you make a contribution toward your retirement. Employers usually match them over time and all of the money is invested in mutual funds.
That is, of course, good for mutual fund companies. And so perhaps it's not a surprise that a mutual fund giant, Fidelity Investments says it too will shift its employees to 401ks. NPR's Chris Arnold reports.
CHRIS ARNOLD: You might think that the nation's largest mutual fund company would have already had its employee retirement plan exclusively in, well, mutual funds. But in fact, in addition to a 401k program, Fidelity has had a defined benefit pension plan. That is until now.
Ms. ANN CROWLEY (Spokeswoman, Fidelity): We are restructuring our retirement benefits program.
ARNOLD: Ann Crowley is a Fidelity spokeswoman. She says the company will still give employees an annual profit-sharing payment of about 10 percent of their salary.
Ms. CROWLEY: In addition, the company also has a generous match, dollar-to-dollar, of employees' contribution to their 401k, up to five percent. We're going to increase that to seven percent.
ARNOLD: Employees will also get a new payment into a health savings account for retirement. But their pension plan is going away. Crowley says the pension was quite small compared to the existing 401k and profit-sharing benefits. Still, Ron Gebhardtsbauer is a fellow with the American Academy of Actuaries. He says he spoke with one Fidelity employee right after the announcement.
Mr. RON GEBHARDTSBAUER (American Academy of Actuaries): For him he was able to calculate. He lost a lot.
ARNOLD: Fidelity's plan is still pretty gold plated with those healthy contributions to the 401k and the profit-sharing accounts. That is if employees contribute to their 401k, Gebhardtsbauer says even at companies where employers offer to kick in free matching money, about a third of workers still fail to contribute and leave that money on the table.
Chris Arnold, NPR News, Boston.
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