First, Pfizer recently told employees that severance packages would be reduced as of mid-May. Now, the big drugmaker plans to eliminate its defined benefit pension plan as of 2018 and will direct employees to funnel their money into a 401K investment account, according to a company memo. And the pending changes will apply to all employees, including the c-suite crowd, a Pfizer spokeswoman tells us.
"The pension changes apply to colleagues at all levels, including executives," the spokeswoman writes. "There are some exceptions, such as colleagues hired after (January 1), 2011, as they already participate in an enhanced savings plan, rather than a pension plan; certain union colleagues based in the US, per their collective bargaining agreement; and colleagues who were part of an acquisition and are not currently earning benefits under a Pfizer pension plan."
The plan has, not surprisingly, upset some Pfizer employees, but one could see this coming. The drugmaker is trying mightily to reinvent itself and slash costs in response to generic competition to several big-selling drugs - notably, the Lipitor cholesterol pill. For instance, Pfizer recently agreed to sell its nutritional business for nearly $11.9 billion to Nestle and is looking to sell or spin off its animal health business.
Both moves would shed numerous jobs, a trend that has been under way for several years. In fact, Pfizer has choppped some 57,800 employees since a cost-cutting program began in 2005 (see page 10 here). The effort accelerated with the 2009 acquisition of Wyeth. As reported previously, the drugmaker is in the process of slashing $1 billion in costs on top of the billions in expenses that have already been drained from operations (see here).
Of course, many companies have been eliminating or altering the terms of their defined benefit pensions plans in recent years as a way to cut expenses, a trend that has accelerated during the recent recession (here is a list of companies that, since 2005, have either terminated plans, frozen plans for new and/or current employees, or made changes to the formula by which pension benefits are calculated).
lost money pic thx to thethreesisters on flickr