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Benefits July 19, 2005
HP Freezes DB Plan and Retiree Medical Program for Younger Workers
July 19, 2005 (PLANSPONSOR.com) - Tucked away in
Tuesday's announcement of planned massive layoffs at HP was
word that the computer maker was also changing its retirement
savings programs.
Reported by Fred Schneyer
An HP news release said that as of January 2006, the company will freeze the pension and retiree medical-program benefits of current employees who do not meet defined criteria based on age and years of company service. Instead, HP will increase its matching contribution to most employees’ 401(k) plans to 6% from 4%.
These changes will not affect benefits currently received under such programs by retirees or eligible employees who are longer-serving and close to retirement age. Additionally, existing employees will retain the benefits they have already earned.
To improve costs, the company plans to slash 14,500 employees, or about 10% of its full-time staff. Starting in fiscal 2007, HP expects approximate ongoing annual savings of $1.9 billion, composed of $1.6 billion in labor costs and $300 million in benefits savings, according to the HP announcement. In fiscal 2006, HP expects savings of between $900 million and $1.05 billion.