SunTrust freezes pension plan, enhances 401(k) planReprints
ATLANTA—SunTrust Banks Inc. says it will freeze its defined benefit pension program and enhance its 401(k) plan.
Participants in SunTrust's cash balance plan, which the Atlanta-based bank set up in 2008, will stop earning pay-related credits after Dec. 31, the company announced last week.
In addition, benefit accruals for long-service employees who opted to remain in SunTrust's traditional final average pay plan at the time of the cash balance plan conversion also will stop at end of this year.
The option to stay in the traditional plan under a reduced benefit formula or earn future benefits in the cash balance plan was extended to employees with 20 or more years of service as of Dec. 31, 2007.
Instead, effective Jan. 1, 2012, SunTrust will fully match employees' 401(k) plan contributions up to 6% of pay. Currently, it matches 100% of employees' salary deferrals up to 5% of pay. It also will make discretionary contributions based on its financial performance.
In addition, SunTrust will make a special one-time contribution to employees' 401(k) plan accounts equal to 5% of eligible 2011 earnings for those who have completed at least 20 years of service as of Dec. 31, 2011, or those who have completed 10 years of service and whose combined age and service is at least 60 as of Dec. 31.
At the time of its 2007 announcement, SunTrust was the second major company to convert a traditional pension plan to a cash balance plan after Congress passed legislation in 2006 that protected new cash balance plans from age discrimination lawsuits.
A SunTrust spokesman said freezing the defined benefit program will help ensure the stability of the company's retirement program while remaining competitive.
As of Jan. 1, SunTrust's defined benefit plan had 25,653 participants. The plan was slightly overfunded with $2.52 billion in assets and $2.26 billion in liabilities as of Dec. 31, 2010, according to its 10-K annual report.
SunTrust's pension plan freeze comes in the wake of a Towers Watson & Co. analysis that more than 40% of Fortune 1000 companies that have defined benefit plans have frozen at least one of those plans.