Dow to freeze U.S. pension plans, contribute $1 billion and hike DC match

Dow Inc., Midland, Mich., will freeze the benefit accruals of its U.S. pension plans at the end of 2023, increase its matching contribution in its defined contribution plans and will contribute $1 billion to the pension plans before the end of the first quarter.

The chemical company announced its plans in an 8-K filing with the SEC on Thursday.

First, Dow will freeze benefit accruals for participants in qualified and non-qualified pension plans, including the Dow Employees' Pension Plan, the Union Carbide Employees' Pension Plan and the Dow Chemical Co. Executives' Supplemental Retirement Plan-Supplemental Benefit, effective Dec. 31, 2023.

In conjunction with that change, beginning Jan. 1, 2022, Dow will match U.S. employee contributions to its qualified 401(k) plan, the Dow Chemical Co. Employees' Savings Plan; and a non-qualified deferred compensation plan, the Dow Chemical Co. Elective Deferral Plan Post 2004, up to 5% of their eligible compensation when they contribute 6%, spokeswoman Ashley Mendoza said.. Also, beginning Jan. 1, 2024, Dow will make an automatic non-elective contribution to the DC plans of 4% of eligible compensation.

Currently, the matching contribution is 4% for most employees when they contribute 6% of eligible compensation, Ms. Mendoza said.

As of Dec. 31, 2019, the Dow Chemical Co. Employees’ Savings Plan had $10.9 billion in assets, according to the company’s most recent 11-K filing.

About 14,400 active employees will be affected by the pension plan freeze, according to the 8-K filing.

In addition, Dow plans to make a voluntary contribution of $1 billion to its U.S. pension plans in the first quarter. The company had originally said in its Feb. 5 10-K filing that it had expected to contribute $300 million to its global pension plans in 2021.

Dow said in the new 8-K filing that the contribution, along with the plan freezes, will reduce the U.S. plans' projected benefit obligations by $350 million to $375 million.

As of Dec. 31, global pension plan assets totaled $26.4 billion, while projected benefit obligations totaled $35.3 billion, for a funding ratio of 74.8%, down from 76.3% a year earlier, according to the Feb. 5 10-K filing. Assets and PBO were not separated by region.

The discount rate for the global pension plans was 2.2% as of Dec. 31, down from 2.81% a year earlier. For U.S. plans only, the discount rate was 2.71%, down from 3.41%. The 10-K filing did not break out the non-U.S. plan discount rate.

Also as of Dec. 31, the actual allocation of the global pension plans was 34.2% fixed income, 19.6% international equities, 14.8% domestic equities, 11.9% private markets, 7.3% real estate, 5.1% hedge funds, 4.9% cash and cash equivalents, 1.8% other investments and 0.4% derivatives.