NORTH AMERICA - Nortel Networks will be making changes to its pension plan that will result in an annual reduction of US$100m in pension costs, as of 1 January 2008.
This was announced in the company’s action plan which was aimed at reducing cost and generating new business initiatives. Nortel declared it should achieve a targeted operating margin expansion in excess of $1.5bn in 2008.
The reduction of $100m a year should take affect in 2008 and result in savings of more than $400m in cash by 2012, the company announced. This will also reduce the unfunded pension liability deficit by around $400m.
Nortel also announced those employees still defined benefits schemes will be transferred to defined contribution schemes. Thr DC programmes will also have a new formula which will amount to employer contributions being equal to 2% of the employees’ eligible earnings.
The company will also provide a 50% match on employee contributions of up to 6% of eligible earnings, for a total maximum of 5% employer contribution.
“We are redesigning our pension plan to reduce the overall cost of the programme while still ensuring we offer a competitive pension plan and overall benefits programme in alignment with industry-benchmarked companies,” said Dennis Carey, Nortel executive vice president of corporate operations.
These announcements were made following a $167m loss registered earlier this month.
Mike Zafirovski, formerly of Motorola, took over as Nortel’s president and CEO last October and had promised to turn the company around.
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