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BOSTON--Mutual fund giant Fidelity Investments is overhauling its retiree savings program, establishing new retiree health care accounts, beefing up its 401(k) plan and terminating its defined benefit pension plan.
Fidelity is setting up health reimbursement arrangements under which Fidelity will provide employees with a $3,000 annual credit. Employees can draw upon the accounts after turning age 55 to pay for retiree health care expenses, such as insurance premiums.
Additionally, Fidelity is improving its 401(k) match, with the company matching 100% of employees' deferrals, up to 7% of pay. Fidelity now fully matches deferrals up to the first 5% of pay.
Fidelity also is terminating, effective June 1, its defined benefit plan, which has more than 32,000 participants. Participants will have a choice of taking their accrued benefits as an annuity or rolling over the benefit into a profit-sharing plan.
A Fidelity spokeswoman said the changes comes in the wake of employee surveys that found that more than 70% of employees didn't know how they will pay for retiree health care expenses. Retiree health care expenses are a "looming challenge" for employees and "we are restructuring our plans to meet that need," the spokeswoman said.
Unlike many other companies that are phasing out or terminating their defined benefit plans, the Fidelity plan is not the cornerstone of its retirement savings program. The biggest component is its profit-sharing plan, which in recent years, Fidelity has annually contributed an amount equal to 10% of employees' salaries, the spokeswoman said.