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CHICAGOAon Corp. Thursday announced changes to its defined benefit pension plans in the United States and United Kingdom.
Effective for service starting on and after Jan. 1, 2007, benefits provided through Aon's U.S. pension plan, which covers about 11,000 employees, will be based on career-average pay rather than pay earned during employees' final years of service.
The change in the benefit formula follows a major pension revamp in 2004, when Aon closed off its U.S. plan to new employees and added a second defined contribution plan, in which Aon's contributions are based on employees' length of service.
Through that action, Aon became one of the first major U.S. employers to phase out its pension plan. Dozens more have since followed.
In the United Kingdom, Aon is proposingsubject to trustee approval and member consultationto completely freeze its defined benefit plans, with future benefits provided through a defined contribution arrangement. The proposed change would affect about 1,700 employees, and Aon expects it would go into effect during the first half of 2007.
Aon's U.K. pension plans have been closed to new employees since Jan. 1, 1999.
The company said the proposed changes will reduce annual pension expense by $60 million a year.
"We believe these changes will help Aon better manage its overall future compensation cost structure," Aon President and CEO Greg Case said in a statement.