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DAYTON, Ohio--Information technology giant NCR Corp. is phasing out its defined benefit pension plan, completing a process it started two years ago when it closed off the $3 billion plan to new and younger employees.
After Dec. 31, 2006, plan participants no longer will earn benefits in the plan, but instead will be eligible for an enhanced 401(k) plan match.
NCR, a 122-year-old company with 2005 revenues of $6 billion and net income of $529 million, said in a filing Wednesday with the Securities and Exchange Commission that the phase-out will reduce its previously expected net retirement expense by about $40 million next year.
NCR's action is the second step it has taken since 2004 to wind down the plan. In September 2004, NCR, a company whose name once was synonymous with cash registers, closed off its pension plan to new and younger employees and offered those individuals a beefed-up 401(k) plan.
Employees age 40 and older were given a choice of continuing to earn benefits in the pension plan or ceasing benefit accruals and instead becoming eligible for the enhanced 401(k) plan match. Under the latest change, after Dec. 31, those older employees who remained in the pension plan will cease earning benefits and will be shifted to the enriched 401(k) plan already offered to other employees.
Under the enriched 401(k) plan, NCR matches 100% of employees' contributions on the first 4% of pay and 50% of contributions on the next 2% of pay. Currently, for employees still earning benefits in the pension plan, NCR matches, in the 401(k) plan, 75% of contributions on the first 3% of pay and 50% of employees' contributions on the next 3% of pay.
NCR is at least the third major employer in recent years to take a two-step approach in phasing out its pension plan.
In 2005, Sears Holdings Corp., the huge Hoffman Estates, Ill.-based retailer, closed off its defined benefit plan to new and younger employees in its Sears Roebuck & Co. operating unit and gave older employees a choice of remaining in the plan or opting out and receiving a more generous 401(k) plan match. Then, effective Jan. 1, 2006, Sears ended benefit accruals for employees still in the pension plan, with all new retirement benefits earned in the 401(k) plan.
Additionally, IBM Corp. closed off its cash balance pension plan to employees hired on or after Jan. 1, 2005, offering those individuals an enriched 401(k) plan. Then, earlier this year, IBM announced it would completely freeze the pension plan in 2008, with future benefits provided through a souped-up 401(k) plan.