Telent Ltd., Stafford, England, has begun a three-month consultation period with its employees to freeze the company's £2.3 billion ($3.8 billion) GEC 1972 defined benefit plan, according to a company announcement.
The consultation period is required by law.
To “bring certainty to future pension costs,” telent executives are in discussion to freeze the defined benefit fund as of April 5, 2010. About 1,300 telent employees are affected by the proposed changes. If plans to freeze the DB plan are finalized, existing employees will be able to transfer to a new defined contribution plan beginning April 6, according to the announcement.
The company also will use money from an existing £500 million escrow account to help plug a pension shortfall of almost £1 billion. The escrow account was set up in 2005 when Ericsson bought the bulk of telent's predecessor, Marconi, to help ensure that Marconi's pension liabilities are funded. Telent was sold in 2007 to buyout firm Pension Corp.
Separately, telent will also contribute a minimum of £4 million a year to close the remaining deficit of about £495 million. “By 2023 … the combination of expected investment returns and telent's additional contributions should ensure the plan is fully funded, sustainable and secure,” according to the announcement.