DuPont will freeze its defined benefit pension plan, beginning in 2018 and eliminate post-retirement health benefits for those under 50.
In a letter to employees, the company cited the 2018 date as possibly coinciding with the spin-off of the combination of Dow and DuPont into three separate publicly traded companies. The merger between DuPont and Dow is now expected to take place in the first quarter of next year.
“The DuPont Board and our senior management team recently completed an extensive and thoughtful evaluation of our retirement benefits and determined that additional changes need to be implemented beginning in 2018. The changes will reflect another step in our multi-year analysis and bring us closer to the practices of our global peer set. We are announcing the changes now in order to give you plenty of time to fully understand them and factor them into your own long-term thinking about retirement,” the letter stated.
DuPont also passed along the findings of a study on pension plans and Fortune 500 companies.
In 2018, benefits from the old pension plan will be frozen, with employees moving over to the company’s 401(k) plan. In 2007, closed the pension program to new employees, who will participate in the 401(k).
DuPont’s 401(k) program, matches on a dollar for dollar basis the employee’s contribution up to 6 percent or his or her income. In addition, DuPont contributes an additional 3 percent without a matching contribution from an employee.
The program is generous when compared to the 401(ks) of many mid-sized companies that only pay 50 cents for every dollar contributed by employees to retirement plans.
Still, the loss of the defined benefit plan is expected to draw criticism. Despite the tax advantages of 401(k) plans that make the contributions less painful, many workers stay out of the plans. That has led to fears that more people will be unprepared for retirement.
Post-retirement medical plans have also disappeared at many companies, leading to concerns on the strain that the change will put on the federal Medicare program.
