Further, beginning in 2008, Anne Crowley, a company spokesman, told the Boston Globe that employees will be able to roll over their existing pension benefits into an existing company profit-sharing plan or they can choose to take those benefits as an annuity upon retirement.
The firm’s matching contribution will be increased from 5% to 7% and, beginning in 2008, Fidelity will credit employee health care savings accounts with $3,000 annually to help pay for retiree healthcare. This money will be accrued in an account in which distributions are not taxed.
Health Care Concerns
The change comes as Fidelity released data that the average 65-year-old couple needs an estimated $215,000 to cover health care costs in retirement (see Estimated $215,000 Needed for Retiree Health Care Costs). According to the Globe, Crowley said that 71% of Fidelity’s employees (who have an average age of about 35) reported they did not know how they would pay for healthcare in retirement. Their average employee is around 35, according to the report.
The pension plan, which the firm says is fully funded to meet current obligations, will be eliminated for approximately 32,000 of the company’s employees, according to the Boston Globe report. According to a filing with the U.S. Department of Labor, the pension plan has 36,800 participants, including current employees, former workers due future benefits, and retirees.
Fidelity will stop making payments into the pension plan June 1, the report said. The report did not say whether there will be any cost savings by the change.