American International Group Inc., New York, plans to freeze its U.S. pension funds, effective Jan. 1, and focus on enhancing its defined contribution plans with additional contributions.
Information on the number of affected defined benefit plan participants, including whether they will be transitioned to a new or existing DC plan, could not be learned.
“After extensive research, we found that AIG's spending on employee retirement programs is materially higher than most of our peers, and that our programs are not in line with where the marketplace is headed. With that in mind, we have decided to freeze AIG's U.S. pension plans,” said Jeffrey Hurd, executive vice president, human resources and administration, in a memo to AIG employees Wednesday. “Recognizing that employees may have to re-examine their approach to saving for retirement, we are also enhancing our 401(k) plans.”
Beginning Jan. 1, “AIG will make a company contribution equal to 3% of your compensation each pay period, up to the annual IRS limit ($265,000 in 2015) — even for employees not currently contributing to their 401(k)/savings plan,” the memo stated. “The new 3% company contribution will be provided in addition to the current matching contribution in each of these plans.”
The contribution changes apply to participants in the American International Group Inc. Incentive Savings Plan, the American General Agents' and Managers' Thrift Plan and the Puerto Rico Capital Growth Plan.
The American International Group Inc. Incentive Savings Plan and the American General Agents' and Managers' Thrift Plan had $3.9 billion and $81.6 million in assets, respectively, as of Dec. 31, 2013, according the plans' most recent Form 5500 filings. An asset size for the Puerto Rico Capital Growth Plan could not immediately be learned.
As of Dec. 31, 2014, AIG's U.S. pension plans had $4.11 billion in assets and $5.77 billion in projected benefit obligations, for a funding ratio of 71.2%, according to its most recent 10-K filing.
AIG officials declined to provide additional information beyond the memo.