DuPont is converting its traditional pension plan to a 401(k) for workers hired after Jan. 1, as part of the ongoing trend of companies shifting towards defined contribution and savings plans.
In 1985, there were 115,000 pension plans, and by 2004, that had dropped to 29,000.
Pension plans are expensive and can lead to large under funded balances when the stock market or interest rates fall, industry analysts noted. Besides more control over their retirement savings, DuPont said in a statement, many workers also like the portability of a 401(k).
"The planned changes reinforce our commitment to help employees provide for a secure retirement," said Jim Borel, human resources senior vice president. "They also modernize the design of our savings and retirement plans for a new generation of employees, many of whom want more direct control and portability in their benefits."
The pension plan for current employees will continue and the change does not affect retirees, former employees with vested benefits or current employees who will retire or leave prior to Jan. 1, 2008.
To replace the potential lost retirement income from the defined-benefit plan, DuPont will enhance its 401(k) plan. Employees will receive a base contribution in their 401 (k) account of 3 % of their pay, including overtime and pay, as well as a 6 % match.