United States Steel Corp.'s move last week to freeze its defined benefit plans for salaried and non-union employees marks a turning point for U.S. retirement plans.
The U.S. Steel plan was one of the first pension plans in the United States.
U.S. Steel announced in an 8-K filing Aug. 21 that it would freeze benefit accruals in its main defined benefit plan and two other supplemental plans for those employees, effective Dec. 31. Participants will be transitioned to a defined contribution plan.
DB assets totaled $6.4 billion as of Dec. 31, 2014, and according to the most recent 5500 filing, there were more than 73,000 participants in the main DB plan. DC assets totaled approximately $2.1 billion as of Dec. 31.
A spokeswoman at U.S. Steel, Pittsburgh, could not provide additional information by press time.
That filing with the Securities and Exchange Commission marks a significant turning point in the history of U.S. defined benefit plans.
In its earliest iteration, the U.S. Steel pension fund was the Carnegie Relief Fund, launched in 1901 by Andrew Carnegie, the steel baron and philanthropist. Funded by Mr. Carnegie with a contribution of $4 million in Carnegie Co. bonds, the relief fund was to provide for Carnegie Co. employees injured at work and for dependents of employees who were killed. In addition, Mr. Carnegie stipulated the income from the bonds was "to provide small pensions or aids to such employees as, after long and creditable service, through exceptional circumstances, need such help in their old age and who make good use of it."
Also in 1901, J.P. Morgan formed U.S. Steel Corp., acquiring an array of steel-related companies, including Carnegie. In 1911, U.S. Steel joined the Carnegie fund for all its other employees and contributed $8 million to the pension fund. In 1914, the pension fund was incorporated as the U.S. Steel & Carnegie Pension Fund.
Corporate America's move away from defined benefit plans has been happening for many years but hit a dubious milestone in 2013, when for the first time since Pensions & Investments began ranking the largest U.S. retirement plans, not a single corporate name appeared in the ranking of the 10 largest defined benefit plans published as part of the 2014 Top 1000 pension plans.