Goodyear Makes DB to DC Switch for Union Employees

Goodyear Tire & Rubber Co. will phase out a defined benefit pension plan covering union employees and set up a 401(k) plan under a new contract with the United Steelworkers (USW) union, Business Insurance reported.

Under the four-year agreement, nearly all USW-represented employees hired since October 2006 will not be offered the defined benefit plan. Effective January 1, Goodyear will set up a new 401(k) plan in which it will make automatic contributions equal to 3% of employees’ pay in addition to matching 50% of employees’ contributions up to the first 4% of pay, a Goodyear spokesman said Wednesday, according to the news report.

The tire-maker already made the DB to DC move for salaried employees effective January 1, 2009 (see “Goodyear Goes DC Route after DB Pension Freeze”).

In another effort to save money, last year Goodyear and the United Steelworkers agreed to set up a VEBA trust to pay retiree health care obligations (see “Goodyear VEBA Gets Court OK”).  The move cut a projected $1.3 billion from the company’s balance sheet and improved cash flow by $145 million a year, according to Business Insurance.