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Eastman Kodak Co. next year will move all employees still accruing benefits in its traditional pension plan to a cash balance pension plan, which it will sweeten, but it will eliminate its 401(k) plan matching contribution.
Rochester, New York-based Kodak set up the cash balance plan in 2000, covering employees hired after February 1999. Current employees were given a one-time choice of remaining in the company’s final average pay plan or moving to the cash balance plan.
Under the cash balance plan, employees earn a benefit equal to 4% of pay. In addition, interest, equal to the 30-year U.S. Treasury bond rate, is added to employees’ account balances.
Under the latest change, the cash balance plan benefit credit will be improved, effective Jan. 1, 2015, to an amount equal to 7% of pay, while the current formula to credit interest to employees’ account balances will continue.
However, the company, also effective Jan. 1, 2015, will no longer match employees’ 401(k) plan contributions. Currently, Kodak fully matches employees’ contributions, up to 1% of pay, and then matches 50% of employees’ salary deferrals, up to the next 4% of pay. That matching feature is only offered to cash balance plan participants.
Through this change in retirement plan design, “our pension benefit will be competitive with companies in our industry,” Kodak CEO Jeff Clarke said Wednesday in a letter to employees.
At the end of 2013, Kodak’s U.S. pension plans were slightly underfunded with about $4.3 billion in liabilities and nearly $4.2 billion in assets, according to its annual 10-K report.
The plans, at the end of last year, had about 50,000 participants, of which 5,750 were active employees, a Kodak spokesman said.
Kodak’s decision to retain its pension plans after it filed for Chapter 11 bankruptcy in 2012, drew praise from the federal Pension Benefit Guaranty Corp. after the company emerged from bankruptcy last year.
“There have been times — far too many — when companies have entered bankruptcy and tried to unnecessarily shed their plans. Not Kodak. The company said they wanted to keep their plans going from the start and we applaud them for doing so,” the PBGC said in a statement last September.
ROCHESTER, N.Y.—Eastman Kodak Co. filed for Chapter 11 bankruptcy protection Thursday listing overall assets of $5.1 billion and debts of $6.75 billion, according to the company's petition to U.S. Bankruptcy Court in New York.