http://www.irishtimes.com/business/work/intel-shuts-pension-scheme-for-irish-staff-1.3045510?mode=sample&auth-failed=1&pw-origin=http%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Fwork%2Fintel-shuts-pension-scheme-for-irish-staff-1.3045510
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Technology giant Intel is closing its final salary pension scheme after the cost of funding it multiplied in recent years.
The 2,100 active members of the scheme – current employees of Intel at its Leixlip plant in Co Kildare – will be transferred to a defined contribution scheme that has already been operating for new recruits since June 2012.
Including deferred members, there are understood to be more than 5,000 people in the scheme who have not yet retired.
The company said that, from the end of June 2017, no further contributions will be paid into the defined benefit (DB) scheme. However, staff and deferred members will retain the benefits built up to date.
Company executives held a series of meetings with staff at the Intel campus on Tuesday to explain why the scheme was closing and what would happen next.
Intel says the cost of servicing the scheme has jumped from 5.6 per cent of employees’ pensionable salary in 2001 to 15.9 per cent now.
“If we don’t take action now, these costs will further double to 30.1 per cent,” the company’s country manager Eamonn
Sinnott said in an email to staff ahead of the meetings.
He said Intel Ireland was putting the new arrangements in place “because the DB model of pension provision is unsustainable”. Rapidly increasing costs were “driven by factors beyond our control and are subject to further unpredictable
Staff were told that the company will put more than $100 million into the scheme to preserve benefits accruing to date and to grow this benefit at a rate of 2.5 per cent per year until retirement.
It said it would also provide a 12 per cent contribution to “kickstart” the new defined contribution arrangement for staff.
Thereafter the company will contribute a percentage of employee remuneration into the new scheme on a prorata basis tocontributions from the workers themselves. Unusually, the contribution will be calculated not just by reference to basic pay but will include shift premiums, bonuses and other income.
Intel has been operating a defined benefit pension scheme since it arrived in Ireland in 1989. It closed the scheme to new members in 2012.