The Markets February 9, 2009

Tenneco Puts Match on Hold

Lake Forest, Illinois-based auto parts manufacturer Tenneco Inc. has suspended its 401(k) match for 2009.
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A company news release said the match suspension was part of a broad cost-cutting effort to deal with the slumping economy. Tenneco had matched 50%, up to the first 8% of pay.

In addition to cutting 1,100 jobs, other compensation and benefits components to the cost-cutting campaign include:

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  • eliminating 2008 performance bonuses for salaried employees
  • reducing total annual compensation for the top 50 executives on average by more than 60%
  • eliminating employee annual salary increases and implementing other salary control actions.

The company said it is also reducing capital expenditures by eliminating all discretionary capital spending including eliminating or deferring regional expansion projects and cutting spending tied to delayed customer launches; closing three manufacturing plants and one engineering facility; continuing to implement hourly layoffs at manufacturing plants worldwide; and initiating unpaid furloughs and work hour reductions for some salaried employees.

“We have and will continue to take aggressive actions to reduce costs, resize our operations and generate and preserve cash in order to weather this crisis,” Chairman and CEO Gregg Sherrill said in the statement.

Tenneco froze its defined benefit pension plan in 2007.

Data & Research February 9, 2009

Census Data Show Strengthening DB to DC Trends

About two-thirds of workers in a new study identified a defined contribution plan as the most important component of their retirement savings.
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That was a central finding of the study by the Employee Benefit Research Institute (EBRI), which said 67.1% of participants had a DC plan as their primary retirement savings vehicle in 2006—more than double that in 1988.

The study was based on 2006 retirement participation and sponsorship levels as represented by the latest data from the U.S. Census Bureau’s Survey of Income and Program Participation (SIPP).

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An EBRI news release said other study findings included that:

  • More than 30% of workers pointed to a defined benefit plan as their primary savings vehicle for retirement in 2006, well below the 56.7% level in 1988.
  • Less than half of all American workers participate in any retirement plan. The percentage of workers participating in a plan decreased to 44% in 2006 from 48% in 2003.
  • The participation level for salary reduction plans was 36.3% in 2006, compared with 15.3% in 1988. However, the average employee contribution to these plans remained unchanged in 2006 (at 7.5%), after increasing gradually from 7.1% in 1993. High contributors (those who contributed 10% or more of their salary to the plan) were more likely to contribute a higher amount in 2006 than in 1993.
  • The sponsorship level for all workers for pay age 16 and over (workers whose employer or union sponsors a pension or retirement plan for any of the employees) was 59% in 2006, according to the government data.
  • The sponsorship level of salary reduction plans was 52.4% from 2006, a steady increase from 45.9% in 1998.

The EBRI data analysis is available here.

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