Dow Chemical Co., Midland, Mich., will close its U.S. defined benefit plans to new salaried employees on Jan. 1, 2008, and instead offer a cash balance plan called the personal pension account. Dow will contribute 5% of annual pay for each employee into the new plan, which has a three-year vesting period and a lump sum provision, said Chris Huntley, Dow spokesman. The announcement was first reported Tuesday afternoon on Pensions & Investments website, www.pionline.com. Dow noted in a news release that pension changes for union employees will be managed per the terms and conditions of the collective bargaining agreements.
Dows U.S. pension plans totaled $11.2 billion as of Dec. 31, according to its most recent annual report.
Dow will maintain its 401(k) plan, which totaled $5.8 billion as of Sept. 30, according to a Pensions & Investments estimate. However, the company made changes to enrollment and company match features for employees hired after Jan. 1, Mr. Huntley said. Dow now will automatically enroll all new employees in the plan at a 3% employee contribution; the company will match all of up to 2% of an employees contribution and 50% of an employees contribution between 2% and 6%. The default investment option for new employees will be into an age-appropriate lifecycle fund, managed by Barclays Global Investors, Mr. Huntley said.
Under the current rules, Dow contributes 1% of pay into the plan for every employee, regardless of whether they elected to enroll, and then matches 50% of employee contributions from 1% to 6% of pay. Dow also said all employees hired after Jan. 1 will not be eligible for retiree medical and retiree life insurance.