American International Group Inc., the insurer seeking to cut costs under Chief Executive Officer Peter Hancock, 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 New York-based insurer said in a memo to employees, without saying how many people will be affected. AIG will contribute an additional 3 percent of compensation toward 401(k) savings plans, without changing its matching program.
Hancock, who became CEO in September of last year, has been moving jobs to lower-cost locations such as Texas and 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.”
The Wall Street Journal reported earlier Thursday on AIG’s move.