American International Group Inc (AIG), insurance goliath and government bail-out poster child, said it will halt employees’ existing pension program in the U.S. and instead focus on 401(k) accounts.
Pensions will freeze on Jan. 1, 2016 for all participants of AIG’s retirement plan, The Wall Street Journal reports, citing an internal memo to employees. AIG will contribute an additional 3 percent of compensation toward 401(k) savings plans, without changing its matching program.
Chief Executive Officer Peter Hancock became CEO in September 2014, with a mandate to cut costs. In addition to the latest pension move, Hancock has been moving jobs to lower-cost locations such as the Philippines, and plans to cut annual general operating costs by as much as 5 percent through 2017.
“AIG is re-evaluating everything we do,” Jeff Hurd, executive vice president of human resources and administration, said in the memo. “After extensive research, we found that AIG’s spending on employee retirement programs is materially higher than most of our peers, and that our programs are not in line with where the marketplace is headed.”
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of 401(k) Specialist and Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots. Experienced financial services content executive specializing in creative new media delivery. He joined the American Retirement Association in 2023 as Chief Content Officer, overseeing communications for the organization, as well as its sister organizations.