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ATLANTA--One of the nation's biggest banks is converting its traditional pension plan to a cash balance plan, the second major company to do so since Congress passed legislation last year that protects new cash balance plans from age discrimination lawsuits.
Beginning Jan. 1, 2008, new SunTrust Banks Inc. employees and employees with fewer than 20 years of service will earn benefits under the cash balance plan. SunTrust employees with 20 or more years of service as of Dec. 31, 2007, will be given the option of staying in the traditional plan under a reduced benefit formula or earning future benefits in the cash balance plan.
Additionally, effective Jan. 1, 2010, Atlanta-based SunTrust, which has more than $180 billion in assets, will stop subsidizing retiree health care coverage for retirees younger than 65 unless retirees were at least age 55 and had 10 years of service prior to that date.
The pension and retiree health plans changes, reported by SunTrust in a U.S. Securities and Exchange Commission filing, will make the "retirement program financially sustainable over the long term by stabilizing the volatility of pension expense" while maintaining a benefit program that employees will value.
Last year, paper packaging and office products company MeadWestvaco Corp. of Richmond, Va., became the first major employer to convert a traditional pension plan to a cash balance plan after Congress, as part of the Pension Protection Act, gave new plans the green light so long as they met a few basic conditions (BI, Nov. 13, 2006).
Cash balance plans are so named because benefits are expressed, like a 401(k) plan, as a cash lump sum.