Unisys Corp. has joined a growing number of companies that have cut back on their defined-benefit pension plans.
The struggling provider of information technology services announced that beginning next year, it will stop accruing future benefits to its pension plans and will close them to new participants. The changes won’t affect benefits earned by current and former employees and retirees as of December 31.
As of January 1, 2007, the company will also increase the company match to its defined contribution savings plan. Unisys will increase its contribution, currently 50 percent of the first 4 percent of eligible pay contributed by participants, to 100 percent of the first 6 percent.
The changes will affect most U.S. employees and senior management.
Unisys stated that it expects its 2006 pension expense worldwide to be approximately $168 million, down from $181 million in 2005. As a result of the newly announced changes, the company added, it will save about $700 million over the next decade, based on current interest rates and actuarial assumptions. In addition, stopping the accruals for future benefits will yield a one-time pre-tax curtailment gain of approximately $45 million in the first quarter of 2006.
“We think these changes have struck the appropriate balance between controlling our pension costs and continuing to help our employees prepare for retirement,” said president and chief executive officer Joseph W. McGrath, in a statement.
Other major companies that recently froze their pension plans include Unisys competitor IBM as well as General Motors and Verizon.