View All News

Avaya to Change Pension Plan for U.S. Salaried Employees

09-12-2003
  • Company To Enhance Existing 401(k) Plan; Defined Benefit PensionPlan Frozen

Avaya Inc., a leading global provider of communications networksand services for businesses, today said it is changing its pensionplan for U.S. salaried employees as part of broader changes to itscompensation and benefits program.

Avaya Inc., a leading global provider of communications networksand services for businesses, today said it is changing its pensionplan for U.S. salaried employees as part of broader changes to itscompensation and benefits program.

Avaya said it is freezing the accruals in its defined benefitpension plan effective Dec. 31, 2003, for U. S. salaried employees.This means employees would not accrue any additional benefits afterDec. 31, 2003. However, an employee's age and service wouldcontinue to count toward pension eligibility and vesting.

Beginning Jan.1, 2004, new and existing U.S. salaried employeeswill be able to participate in an enhanced 401(k) plan.

Under the new 401(k) plan Avaya will match up to six percent ofan employee's salary and bonus. First, Avaya will automaticallycontribute two percent of an eligible employee's salary and bonusto a 401(k) plan whether or not an employee participates. Inaddition, for the first two percent an employee contributes, Avayawill match the employee's contribution dollar for dollar. For thenext four percent an employee contributes, the company will match50 cents for each dollar the employee contributes. Avaya also isremoving the current $2,500 cap that exists on the company matchand is eliminating a variable match based on the performance of thebusiness.

To help employees integrate retirement planning into theiroverall financial management, Avaya will offer company-providedprofessional financial planning services.

Avaya said about 8,300 U.S. salaried employees are affected bythe changes. The company is making no changes to the pension forits 5,200 union employees whose pension is covered by collectivebargaining agreements. Current retirees also are not affected bythe change.

The company noted it has two pension programs for U.S. salariedemployees. Generally, employees who began working prior to Jan. 1,1999, are in the service-based program. Employees who joined on orafter Jan. 1, 1999, are in the account balance program.

"The decision to change the pension plan was not made lightly.We sought to further strengthen Avaya's financial position whilecontinuing to provide an attractive overall pay package foremployees," said Don Peterson, chairman and CEO, Avaya. "The changeto the plan represents a portion of the $25 million to $30 millionin permanent quarterly cost reductions we said we would take out ofthe business beginning in fiscal 2004.

"In addition to reducing our future cash contributions to theexisting plan, this move to a greatly enhanced 401(k) savings planwill align us with other newer technology companies. We believe ournew 401(k) plan, which is among the most generous in corporateAmerica, will make us even more attractive to new employees wholike the portability of those plans."

Avaya said the combination of the pension plan change and a $105million additional voluntary contribution to the plan it announcedearlier this week will, over time, reduce the company's futurebenefit obligation and help improve the funded status of thepension plan.

About Avaya
Avaya Inc. designs, builds and manages communications networks formore than 1 million businesses worldwide, including 90 percent ofthe FORTUNE 500®. Focused on businesses large to small, Avaya is aworld leader in secure and reliable Internet Protocol (IP)telephony systems and communications software applications andservices.

Driving the convergence of voice and data communications withbusiness applications — and distinguished by comprehensiveworldwide services — Avaya helps customers leverage existing andnew networks to achieve superior business results. For moreinformation visit the Avaya Web site: http://www.avaya.com

Categories: Press Releases
View All News