SunTrust Banks Inc. in Atlanta is freezing its pension plan at the end of the year in an effort to reduce its overall employee benefits costs.
SunTrust spokesman Mike McCoy said Friday that the $172 billion-asset company is implementing the change so that it can remain competitive and continue offering benefits that are sustainable in the long term. At the end of 2010, SunTrust's pension obligations totaled $2.26 billion, up 12.6% from 2009, according to a February Securities and Exchange Commission filing.
SunTrust will honor any pension benefits earned prior to Dec. 31, but employees will not accumulate additional benefits, McCoy said. The pension benefits were available to most SunTrust employees. Employees were eligible to participate after one year with the company and were fully vested after three years.
SunTrust will continue to offer 401(k) plans and will increase its annual matching contribution to 6% from 5%, McCoy said. Additionally, SunTrust will make discretionary contributions to 401(k) plans starting in 2013. This amount will be based on a percentage of the employee's eligible compensation, McCoy said.
Private-sector employee participation in defined benefit pension plans has significantly declined over the last three decades, according to data from the Employee Benefit Research Institute. In 2008, 3% of private sector employees had a pension, down from 28% in 1979. In contrast, private sector workers participating in defined contribution 401(k)-type plans increased from 7% to 31% over that same time period. Workers that that participated in both rose from 10% to 12%.
News of SunTrust's plans to eliminate its pension plan was first reported Thursday by the Atlanta Journal-Constitution.