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FedEx 'Modernizing' Pension Plan
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<blockquote data-quote="Channahon" data-source="post: 169923" data-attributes="member: 7666"><p><strong>Following industry trend, FedEx to cap retirement pension plan, revamp 401(k) benefits</strong></p><p>AP</p><p>MEMPHIS, Tenn. (AP) - Like many companies across industries, FedEx Corp. is capping the traditional pension plan offered for most of its employees. Instead it will offer a cash balance plan, which lets workers take benefits with them if they leave the company.</p><p></p><p>Traditional pension plans offer a defined monthly benefit when employees retire, with employer contributions varying, depending on pension fund investment returns. But the unpredictability and volatility involved has led many companies to move away from those kind of pensions.</p><p></p><p>Under FedEx's program, disclosed Tuesday, most employees who participate in a pension plan will begin accruing future benefits under a cash-balance formula, which FedEx calls the Portable Pension Account, effective June 1, 2008. Current retirees won't be affected, FedEx said.</p><p></p><p>Any benefits already accrued under the traditional pension benefit formula will be capped as of May 31, 2008, and will be payable monthly at retirement.</p><p></p><p>About 170,000 employees in the U.S. will be affected by the changes, according to FedEx spokesman Jess Bunn.</p><p></p><p>The package shipper and owner of the world's largest cargo airline said the pension shifts resulted from changes in accounting rules and increasing life expectancy rates.</p><p></p><p>Alan Graf Jr., FedEx's chief financial officer, said the Pension Protection Act, which passed last year, lets FedEx improve its 401(k) retirement plans and expand the number of workers covered by its Portable Pension Account, which FedEx introduced in 2003. Cash-balance plans also have risen in stature since Congress last year sought to end questions about their legality.</p><p></p><p>The Portable Pension Account will allow employees to take their vested benefits with them if they leave FedEx; they will be vested after three years of service instead of the current five years.</p><p></p><p>For its 401(k) plans, FedEx will increase its matching contributions for most employees and will provide additional investment options. The new federal law allows FedEx to automatically enroll employees and increase their saving contributions each year.</p><p></p><p>FedEx said its costs for administering the new plans would be about the same as what it would have incurred with the current plan.</p></blockquote><p></p>
[QUOTE="Channahon, post: 169923, member: 7666"] [B]Following industry trend, FedEx to cap retirement pension plan, revamp 401(k) benefits[/B] AP MEMPHIS, Tenn. (AP) - Like many companies across industries, FedEx Corp. is capping the traditional pension plan offered for most of its employees. Instead it will offer a cash balance plan, which lets workers take benefits with them if they leave the company. Traditional pension plans offer a defined monthly benefit when employees retire, with employer contributions varying, depending on pension fund investment returns. But the unpredictability and volatility involved has led many companies to move away from those kind of pensions. Under FedEx's program, disclosed Tuesday, most employees who participate in a pension plan will begin accruing future benefits under a cash-balance formula, which FedEx calls the Portable Pension Account, effective June 1, 2008. Current retirees won't be affected, FedEx said. Any benefits already accrued under the traditional pension benefit formula will be capped as of May 31, 2008, and will be payable monthly at retirement. About 170,000 employees in the U.S. will be affected by the changes, according to FedEx spokesman Jess Bunn. The package shipper and owner of the world's largest cargo airline said the pension shifts resulted from changes in accounting rules and increasing life expectancy rates. Alan Graf Jr., FedEx's chief financial officer, said the Pension Protection Act, which passed last year, lets FedEx improve its 401(k) retirement plans and expand the number of workers covered by its Portable Pension Account, which FedEx introduced in 2003. Cash-balance plans also have risen in stature since Congress last year sought to end questions about their legality. The Portable Pension Account will allow employees to take their vested benefits with them if they leave FedEx; they will be vested after three years of service instead of the current five years. For its 401(k) plans, FedEx will increase its matching contributions for most employees and will provide additional investment options. The new federal law allows FedEx to automatically enroll employees and increase their saving contributions each year. FedEx said its costs for administering the new plans would be about the same as what it would have incurred with the current plan. [/QUOTE]
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