CIGNA Corp., Philadelphia, will freeze its cash balance pension plan and enhance its 401(k) plan.
Effective July 1, participants in the cash balance plan no longer will accrue new benefits, though they will continue to earn interest credits on their account balances, and the company will fully vest all those at CIGNA employed as of April 1 who are not yet vested.
CIGNA on Jan. 1, 2010, will match 100% of employees deferrals to its 401(k) plan, up to the first 3% of pay, and will match 50% of employee deferrals on the next 3% of pay. It currently matches 50% of contributions, up to the first 6% of pay.
New employees also will become eligible for the company match as soon as they join the plan; currently, employees have to complete one year of service before they are eligible for a matching contribution.
In addition, employees will fully vest in matching contributions after two years of service, down from the current five-year requirement.
The company had $2.7 billion in defined benefit assets and its 401(k) plan was valued at $2.3 billion, both as of Dec. 31, according to Pensions & Investments data.
CIGNA, which estimates that the changes will result in annual savings of $40 million, noted that its retirement benefits plan package already was significantly higher than the average package provided by our competitors. These actions bring our retirement benefits in line with those of our direct competitors.
Jerry Geisel is a reporter at Business Insurance, a sister publication of Pensions & Investments.