Hewlett-Packard Co.
Pension Freeze Fact Sheet
Center for Retirement Research paper:
Click here to read "Why Are Healthy Employers Freezing Their Pensions?"
Hewlett-Packard Co.
U.S. EMPLOYEES: 71,000
TYPE OF PLANS: Traditional Defined Benefit — 26,100 participants affected; Cash Balance — 6,100 participants affected
DATE ANNOUNCED: July 19, 2005
DATE EFFECTIVE: Jan. 1, 2006
DESCRIPTION OF FREEZE: Partial Freeze and Freeze for New Employees. U.S. employees whose combined age and tenure did not equal a minimum of 62, as of Dec. 31, stopped accruing defined benefit pension benefits. Also, new hires are not eligible to participate in the defined benefit pension plan.
PLAN SOLVENCY: The U.S. plan assets, at year-end 2005, were $4.8 billion. Obligations of these plans were $5.3 billion.
REPORTED FINANCIAL IMPLICATION: Due to the freeze, defined benefit pension obligations were expected to decline by $526 million. As a result of this reduction, Hewlett-Packard recognized a gain of $199 million in the fourth quarter of fiscal 2005. In 2006, the company will save an estimated $154 million on account of the freeze. The company expects annual savings of $300 million starting in 2007 solely as a result of the pension freeze.
NEW ARRANGEMENTS FOR EMPLOYEES: Hewlett-Packard increased the total 401(k) contribution match to 6% from 4% of pay.
BACKGROUND: Hewlett-Packard is among the world’s largest information technology companies. The announcement was made just weeks after IBM made a similar change. Many saw Hewlett-Packard's actions as a direct effort to match IBM and remain competitive. The announcement was also made in tandem with large cuts in Hewlett-Packard's workforce and significant restructuring.
Center for Retirement Research paper:
Click here to read "Why Are Healthy Employers Freezing Their Pensions?"
All "Pension Freeze Fact Sheets" posted were created by the Center for Retirement Research at Boston College, which is solely responsible for the research, findings and all materials contained therein. Pensions & Investments has not verified or edited the materials (other than for length and style) and does not necessarily agree or disagree with the analysis and positions expressed by the authors. Reference to any company, product or service does not imply recommendation or sponsorship by Pensions & Investments.
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