Bad news for Bank of America employees. Here is CNN Money with the details:
Bank of America announced plans Thursday to freeze pension plans, effective in July, and increase its 401(k) contributions instead.Of course, this is yet another reason why the Federal Reserve has been so desperate to pump up the stock market. It would be far less palatable for companies to be able to dump their pension plans and go to a 401(k) only system if the DOW were still bouncing around near its March 2009 lows. It also creates a condition where unless the stock market continues to rise robustly forever and ever, the employees will be facing poverty and destitution after they retire, assuming the economy does not crash long before then.
Eligible employees will keep the pension benefits that they've earned to date but will not receive additional benefits, Bank of America (BAC, Fortune 500) spokesman Scott Silvestri said.
The company will instead begin making an additional 2-3% annual contribution to employees' 401(k) accounts, on top of the existing program that matches employee contributions up to 5%.
"Making these changes simplifies our offerings, gives employees control in managing their retirement savings and ensures our retirement benefits remain competitive," Silvestri said in an email.
U.S. companies are increasingly moving away from traditional pensions and toward 401(k) plans in an effort to save costs and minimize funding uncertainty. Last week, General Motors announced that it had shifted its senior salaried workers away from a traditional pension plan to a 401(k) plan.
Bonus: Better hope you die before you get old