Wells Fargo & Co. told employees on Monday it will no longer contribute
to their traditional pension plan, effectively cutting the total compensation of
its workers less than two weeks after announcing record first-quarter
profit.
The San Francisco bank is combining its existing program with that of
Wachovia Corp., the Charlotte, N.C., bank it acquired in December, and freezing
both companies' cash balance plans, a type of defined benefit plan.
"We must manage expenses prudently to help Wells Fargo continue our long
track record of profitable growth so have decided to have one team member
retirement plan for the combined company," spokesman Chris Hammond said in a
statement. "These decisions were difficult and we are confident that we're
taking the right steps to ensure the long-term strength of our company."
He said the bank will maintain the dollar-for-dollar match for its 401(k)
plan, up to 6 percent of pay.
Current participants in the cash balance plans will keep their accrued
benefits and account balances, but no new employees can enter the program,
according to an internal memo from Julie White, executive vice president of
human resources at Wells, obtained by The Chronicle. Workers can take
distributions from the plan after they leave the company.
One Wells Fargo employee, who requested anonymity because the individual
wasn't authorized to speak to the media, said Wells Fargo's strong benefits plan
has been crucial in keeping the company competitive in terms of recruitment.
"Now the benefits side is deteriorating," the worker said. "It's a big
disappointment. There is a feeling of lack of loyalty."
Late last month, Wells Fargo reported that the Wachovia takeover and surging
deposits propelled first-quarter net income to $3.05 billion, up 52 percent from
a year earlier. But the company's capital levels have been stretched by
acquisition costs, credit write-downs and increased lending.
Reports began leaking out Monday that regulators may force the company to
raise additional capital to protect against potential future losses, after
government stress tests concluded the San Francisco bank would struggle to
survive a deeper recession.
Wells Fargo is just the latest in a long line of companies freezing their
pension plans as the economy slid into recession, said Karen Friedman, policy
director at the Pension Rights Center. At least 14 major companies have done so
this year, including beermaker Anheuser-Busch Cos. and newspaper publishers
McClatchy Co. and E.W. Scripps Co., according to the Washington, D.C., consumer
group.
"Because of the collapse in this country, companies are saying they can't
afford it," she said. "The question is whether it is true or if they're using
(the downturn) as an excuse."
Separately on Tuesday, the Charlotte Business Journal reported that Wells
Fargo plans to lay off 548 workers in Charlotte.