American International Group Inc. will freeze its defined benefit pension plan, effective January 1, 2016, according to an internal company memo obtained by the Wall Street Journal.
It is the latest in the on going trend of large sponsors of traditional pension plans moving to a defined contribution savings model in the effort to limit employer liabilities and funding volatility.
At the end of August, Pittsburgh-based United States Steel Corp. announced in an 8-K filing with the Securities and Exchange Commission that it, too, was freezing its defined benefit plan for salaried and non-union employees, effective at the end of this year.
Recommended For You
AIG's pension plan reportedly has $4.1 billion in assets and $5.7 billion in future obligations.
It is the fourth announcement in 2015 of a sponsor transitioning out of its defined benefit plan, according to the Pension Rights Center.
The group, which advocates on behalf of retirees' rights, said 14 plans were frozen in 2014. About 190 sponsors have frozen plans since 2005.
In the memo obtained by the Wall Street Journal, AIG's vice president of human resources said the decision to transfer out of its defined benefit plan came after discovering the company's pension costs were more than most of its competitors, and that "our programs are not in line with where the marketplace is headed."
The company said it intends to enhance its contribution levels to its existing 401(k) plan.
About 43,700 AIG employees are enrolled in the company's 401(k) plan, which holds about $3.9 billion in assets.
Brightscope rates the plan in the top 15 percent of all plans relative to company generosity, salary deferrals, and total plan costs.
In the United States, defined contribution assets have taken over defined benefit assets, according to Towers Watson.
Defined contribution assets account for 58 percent of retirement assets, up from 55 percent in 2009, and 52 percent in 2004.
The U.S. and Australia are the only two major economies in the world with more assets in the DC plans than in traditional pension plans.
In Australia, DC assets represent 85 percent of all retirement assets, according to Tower's Watson.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
