Freezing of Defined Benefit Plan/Enrichment of 401k - Communications I

[Guest SSCARO]

A company is freezing it's DB plan and enriching significantly the match and vesting schedule in the 401k. There are some older participants who will be adversely affected by the change, but the vast majority of the workforce is younger and will benefit greatly from the changes in the 401k. Does anyone have advice concerning the communication of this change?

[Larry M]

you have created a difficult scenario.

It is somewhat similar to that which is faced by those who convert to cash balance plans - without modification, the employer dollars are skewed toward the younger employees and, usually, those with fewer years of service.

You have to decide whether you want to add some sweetener to mollify the older employees (with either additional cost to employer - or reallocation of some of the profit sharing/401(k) money to the older (through, a profit sharing allocation which gives a higher percentage to older, longer service employees) or face the wrath of the senior employees.

It's your money - your employees - your decision.

[david rigby]

Larry is correct, and he has hit the major points.

If you have any specific ideas or concepts that you would like feedback on, just post.

One other thing to consider might be whether there are areas outside the qualified plan arena where you can help with the employee relations issue for older EES.