Benefits & ERISA Law

Motorola Freezes Defined Benefit Plan and Ends 401(k) Match

By Suzanne Wynn

In a sign of the times, Motorola announced that, effective March 1, 2009, it is freezing its defined benefit plan and, effective January 1, 2009, it will end matching contributions to its 401(k) plan. Motorola also announced that its co-CEOs will take a 25% decrease in base salary in 2009, and that one CEO will forgo his 2008 cash bonus earned under Motorola’s incentive plan. The other CEO will voluntarily reduce his bonus to an amount equal to the other CEO’s forfeited bonus and will take the remainder of the bonus in the form of restrict stock units.

What makes this newsworthy is the size and age of Motorola’s plans. A quick check of the 2006 Form 5500 filed on behalf of the Motorola Inc. 401(k) Plan, which is the most recent 5500 available, reveals that Motorola’s 401(k) plan had 46,795 participants with account balances on December 31, 2006. For 2006, the plan received $83,620,715 in employer contributions, which included the matching contributions Motorola made into the plan for 2006. The plan has been around since November 18, 1947.

The Motorola Inc. Pension Plan is even larger and almost as old. It has been around since January 1, 1958, and had 92,837 participants and beneficiaries entitled to receive benefits as of the end of 2006. Motorola contributed $161,696,867 in employer contributions into this plan in 2006.

The Motorola Elected Officers Supplementary Plan is much smaller and much younger. Created on November 9, 1988, this plan benefits 33 employees. Of these 33 employees, 20 employees are active participants and 13 participants are retired or separated participants entitled to future benefits as of December 31, 2006. This plan started 2006 with $91,658,191 in assets. It received $3,043,897 in employer contributions for 2006, had other income of $3,345,937, and paid benefits, including direct rollovers of $20,111,263, ending 2006 with $77,936,762 in assets.

As more employers, both large and small, are expected to reduce or end matching contributions for the 2009 plan years, it will be interesting to check back on this plan to see what happens to the 401(k) and defined benefit plans after the double-whammy of a bad stock market and no new employer matching contributions compared to what happens to the small non-qualified plan for Motorola executives.

Hat tip to FreeERISA.com for the 5500 information.

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Full post as published by Pension Protection Act Blog on December 17, 2008 (boomark / email).