Honda has joined a growing list of employers cutting benefits when the automaker's U.S. arm announced it is dropping pension plans for some employees, reducing benefits for others and shifting retired workers to new health plans to reduce costs.
Honda told workers in a letter obtained by the Columbus Dispatch that beginning in January new employees would no longer be eligible for a defined benefits pension plan. They will be offered 401(k)s instead. In addition, current employees will see their pension payments cut. They already can invest in a supplemental 401(k) plan.
Honda is also switching the health insurance available to retired workers. The new plans will offer benefits that are not as generous. It was unclear whether the retirees are being moved to private health exchanges. Such switches are gaining momentum with Time Warner and IBM doing so in the last week. GE, Caterpillar Inc. and DuPont Co. preceded them. Other companies, such as Diebold, have frozen pension plans.
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Other automakers, including Ford, GM, Chrysler and Nissan, have already eliminated pensions for new workers. Honda has more than 27,000 employees and 4,000 retirees in the United States.
The letter looked at how the cuts would affect a current employee who is 55 and plans to work another decade. Assuming retirement at 65, 25 years of service and base pay of $50,000 per year, annual pension payments would drop from a little more than $34,000 to $28,000 or less.
The changes will "balance associate benefits with what the company needs to secure its future," Tetsuo Iwamura, Honda's top executive in North America, said in the letter to employees.
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