 WILMINGTON, Del. (From The News-Journal) -- DuPont will no longer contribute to active employees' pension plans, a move that will affect the retirement of 13,000 workers, including 2,800 in Delaware.
The Wilmington-area company announced Thursday that workers will stop accruing benefits sometime in November 2018 or the creation date of the first independent company spawned through the proposed $130 billion merger with Dow. Only employees in the United States and Puerto Rico will be affected by this move.
The company also eliminated retirement health benefits, including dental and life insurance for all employees under the age of 50 when the pension contribution ends in about two years.
DuPont estimates the changes will reduce its long-term employee benefits obligation by about $550 million, creating a fourth-quarter pre-tax gain of $380 million. Once DuPont stops adding to active employees' pensions, it will eliminate the $50 million it pays annually to maintain the plan.
Cost reductions associated with the phaseout of employee contributions to the pension plan are considered new cuts. They are not part of the $700 million DuPont is seeking to eliminate from its budget by the end of this year.
All benefits earned by employees through the termination of new contributions in 2018 will remain. Under federal law, those benefits cannot be touched. Current retirees' pensions will not be impacted.
In 2007, DuPont closed the pension plan to new employees. At that time, the company reduced its contribution to the employee plan by two-thirds, but the company also put all of its workers in an enhanced 401(k) benefit. DuPont provides a 9% company contribution to 401(k).
The company said 401(k) plans and health savings accounts will not be affected by Thursday's actions.
Workers at DuPont's Chestnut Run Headquarters said they were still digesting the news Wednesday afternoon. A 35-year DuPont veteran said the decision won't affect her because she still as a 401(k) and her pension has built up over time.
"My plan was to live on the pension, and I could certainly do that," she said. "I'm only going to lose a small portion of what I was expecting."
Another DuPonter said employees were preparing for something like this given the company's efforts to reduce costs and the fact that the pension contribution for active employees was cut by roughly 75% nearly a decade ago.
"I think everyone was expecting this," he said. "They have eliminated the final one-third."
Norman Stein, a professor of pension and employee benefits law at Drexel University in Philadelphia, said the move hurts older, longtime employees. Typically, most pension plans' retirement payouts are based on a workers' final salary before they leave the company.
"Most defined benefit plans reward longevity and loyalty because the most valuable benefits are the ones you accrue toward the the end of your career," he said. "The implied nature of the pension promise is that if an employee gives a company their career, they are going to get a good retirement."
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