DuPont Plans Pension Cuts

DuPont reduces defined pension plan benefits, expects future earnings improvement.

DuPont, the Wilmington, Delaware-based chemical company, will begin reducing benefits on its defined-benefit pension program in 2008, and will close the plan to new employees as of January 2007.

The changes are part of DuPont’s strategy of shifting retirement benefits away from the defined-benefit pension plan and toward a 401(k) plan. The changes are “consistent with market trends in employee benefits and will enhance the company’s business competitiveness,” remarked James Borel, DuPont’s senior vice president of human resources, in a statement. The amendments to the plan do not affect the company’s current U.S. retirees, former employees with vested benefits, or current employees who retire or terminate their employment before January 1, 2008.

Under the planned change, current employees will continue to be in the defined benefit pension program, however, after 2007, benefits will accrue at one-third of the current rate. The company-paid survivor benefit will not accrue after December 31, 2007, according to a DuPont announcement, although the benefit that employees have earned until that date will be preserved.

Starting in January 2008, all employees will be enrolled in an “enhanced savings and investment plan” and the company will automatically contribute 3 percent of each employee’s pay into his or her account. Employees who contribute to the plan will receive a full company match on the first 6 percent of their salary that they contribute. Currently, the company match is less than that, just 50 percent of up to 6 percent of an employee’s savings.

Employees that join DuPont after January 1, 2007 will not be able to participate in the pension and retirement plan nor will they receive a company subsidy for retiree healthcare or retiree life insurance. Those employees will be part of the enhanced savings plan.

DuPont does not expect the pension plan changes to have much of an effect on its 2006 earnings. The company will record a modest benefit to earnings over the rest of the year from a required third quarter re-measurement of its U.S. pension cost. Beginning in 2007, the pension plan amendments are expected to improve earnings by $.03 per share and in 2008, by $.05 per share.

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