Posted on 12 May 2009
CIGNA Corp. told its employees Monday it will freeze its pension plan July 1 to save $40 million a year, but will increase the company match for worker contributions to a 401(k) savings plan.
CIGNA, which joins many other employers in freezing pension plans, said the decision will also provide the company a one-time, $39 million accounting credit. The changes affect 26,000 employees, but not the more than 40,000 retirees.
Employees won't earn any new benefits under the pension plan after July 1 but will retain any benefits they've earned so far and their account balances, which will be credited with quarterly interest. CIGNA will increase the 401(k) match from 3 percent to 4.5 percent of eligible pay.
The pension plan decision is likely to trouble employees, but CIGNA said it brings the company in line with competitors.
"While the company continues to be financially stable, making this change will improve our competitive cost position, which in turn has meaningful growth potential associated with it, allowing us to help additional individuals to improve their health, well-being and security," CIGNA said.
CIGNA noted as of July 1, all active employees who are not yet vested under the pension plan will become 100 percent vested. The early vesting will apply retroactively to anyone who was an employee on April 1, 2009.
Philadelphia-based CIGNA, whose health insurance business is based in Bloomfield, has been cutting costs and laying off employees as it deals with declining enrollment in the nation's recession.