Recently, Walt Disney Co. announced that it will be dropping pensions as a benefit for new salaried employees beginning January 1, 2012. Existing salaried employees will have their current plans revised; Disney’s union workers will not be impacted by this change.
The pension revisions will affect approximately 9,500 of the 62,000 people who work in Florida for Walt Disney World, Disney Cruise Line and Disney Vacation Club. Currently, separate pension plans are maintained for Disney employees and those who work for the ABC Network (which was acquired by Disney in the 1990’s.) Now, the pension revisions for current salaried employees will involve merging the two plans. Additionally, current eligible employees will also continue to have access to a 401(k) retirement plan.
Starting next year, new salaried hires will be unable to access the revised pension plan. Instead, they will be allowed access to Walt Disney Co.’s 401(k) program, and receive benefit payments in the form of new, defined-contribution retirement accounts.
The move to a defined-contribution retirement account only, which gives the employer more flexibility and control over how much they contribute to an employee’s retirement account annually, is expected to save Disney between $350 million and $400 million over the next five years.
Said Jay Rasulo, Disney’s senior executive vice president and chief financial officer, the changes “[are expected] to reduce our pension expense by 25 [percent to] 30 percent versus what we would have incurred under our historic program.”
While Disney is certainly not the first company to make the switch to a defined-contribution retirement plan, experts say this type of plan is good for employees, as well.
Says J. Clay Singleton, the Cornell Professor of Finance at Rollins College,
The real benefit to the employee of a defined-contribution plan is the money is set aside as they go along. You’re not dependent on any one company — your employer — to be fiscally sound once you go to use the funds in retirement.
While unions that represent hourly workers at Walt Disney World have fought against this change, at this time, they remain unaffected by the company’s retirement plan revisions.