SAN FRANCISCO—Wells Fargo & Co. is freezing its cash balance pension plan, making it one of the largest employers to do so.
Effective July 1, employees no longer will earn benefits in the plan. Wells Fargo also is freezing the cash balance plan sponsored by Wachovia Corp., a Charlotte, N.C.-based bank Wells Fargo acquired last year.
Wells Fargo will continue to match 100% of employees' 401(k) plan salary deferrals, up to the first 6% of pay.
Wells Fargo said in a statement that the decisions to freeze the plans were "difficult" but that it is "confident that we're taking the right steps to ensure the long-term strength of our company."
It is also said that the 401(k) plan "is one of the most beneficial tools" for employees to save for retirement.
San Francisco-based Wells Fargo, which ranks at No. 41 on the Fortune 100, joins several other large, well-known companies—including Boeing Co., IBM Corp. and Verizon Communications Inc.—that have announced over the last couple of years that they are phasing out their cash balance plans.
Some benefits experts predicted that cash balance plans would make a big comeback after Congress made clear in a 2006 law that the plans' basic design does not discriminate against older employees, ending uncertainty about cash balance plans' legal status.
While a few major employers, including most recently Coca-Cola Co., have adopted cash balance plans since the 2006 law, such startups have been outnumbered by other big employers' decisions to phase out the plans. Such changes are part of a larger trend of employers moving away from all types of defined benefit plans.
Cash balance plans are so named because employees' accrued benefits are communicated as a cash lump sum rather than as an annuity payable at retirement.
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