Carpenter Technology Corp., Wyomissing, Pa., will freeze its defined benefit plan and will transition about 1,900 employees to its 401(k) retirement plan, the company said in a news release. The change will go into effect Dec. 31.
The company also plans to voluntarily contribute $100 million to the DB plan within the next 60 days to bolster its funding position. Carpenter Technology expects a reduction of $40 million to $45 million in its annual net pension expenses as a result of this move.
“Our decision to transition from a traditional defined benefit pension plan to a more typical defined contribution plan reflects our goal to provide our employees a competitive retirement plan option while aligning the majority of our workforce under a common retirement plan,” said Tony Thene, president and CEO, in the news release.
Carpenter Technology now expects net pension expense for fiscal year 2017 to be about $39 million to $44 million. The reduction in net pension expenses excludes the expected incremental defined contribution plan costs of about $5 million in the second half of fiscal year 2017.
The pension fund had $885 million in assets and $1.4 billion in liabilities, for a funding ratio of 63%, as of June 30, the end of its fiscal year, according to the firm's 10-K. The target allocation for pension plan assets is to have 60% in return seeking assets, which include domestic and international equities and diversified loan funds, and 40% in liability-matching assets, which include long-duration bond funds.
The company had $65.5 million in DC assets as of Dec. 31, according to its 11-K filings.
Carpenter Technology Corp. spokesman William J. Rudolph Jr. could not be immediately reached for comment by press time.
