Alcoa Inc. will eliminate its defined benefit pension plan for most new U.S. salaried employees, effective March 1, 2006, the company said Monday.
The world’s biggest aluminum producer became the latest big U.S. employer to replace a traditional pension plan with a 401(k) defined contribution plan for new hires.
Alcoa said the changes will not affect current employees or retirees, who will continue to participate in their current defined benefit pension and defined contribution savings plans.
Under the new arrangement, Alcoa said it will make a contribution of 3 percent of an employee’s annual salary and bonus to the retirement plan, whether or not the employee contributes to the 401(k).
Alcoa said it will also match the first 6 percent of salary that an employee contributes to the savings plan.
While Alcoa said the elimination of the defined benefit plan for new hires will limit long-term liability for the company, it added there is no immediate impact on the company’s profitability.
On Jan. 5, technology company IBM said it would save billions of dollars by freezing its current pension plan and boosting its 401(k) offering.