Con-way Inc., San Mateo, Calif., is freezing its $1 billion defined benefit plan as of Dec. 31 to new employees, who will be able to participate in an enhanced 401(k) plan. The move is intended to reduce the company's exposure to pension cost volatility and make pension plan expenses more predictable, according to a news release. The defined benefit plan is fully funded on an ERISA basis, said Gary Frantz, Con-way spokesman.
Con-way will increase its 401(k) employee match to 50% of the first 6% of salary, up from the current level of 50% of the first 3% of salary, and will add a base contribution equaling 3% to 5% of the employee's pay, based on years of service. The company will also make a "transition contribution" to the 401(k) accounts of qualifying employees that will equal 1% to 3% of pay, depending on combined age and years of service as of Dec. 31. The company had $900 million in 401(k) assets as of June 30, Mr. Frantz said.
Employees who are participants in the DB plan as of Dec. 31 will retain all benefits and credited service time earned. The company also will continue to fund the pension plan with annual contributions to ensure futures benefit obligations are met, the news release said.
The changes will result in a "nominal increase in pension and retirement expense for 2007, which should moderate in future years," according to the release. For 2006, the company will make a total of $75 million in contributions.