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United Technologies Corporation was ahead of its time when it came to employee retirement benefits.
The Fortune 500 company — the parent to Otis, Pratt & Whitney, UTC Aerospace Systems and UTC Climate, Controls & Security— made a point of offering its employees an in-plan guarantee of retirement income well before the topic of lifetime guarantees in 401(k) plans took center stage in the national discussion.
Five years ago, the company decided to revamp its retirement plan, and worked with Prudential Retirement to offer an in-plan retirement income solution to its employees. Now it's hoping its success story will act as an example to other companies that can’t afford to offer pension plans, but would still like to see their employees have a stable retirement.
Kevin Hanney, senior director, pension investments, for United Technologies, started with the company in mid-2005. At the time, UTC already had a relationship with Prudential. Hanney told the company’s Prudential representative at the time that he was happy with the retirement plan the company had, but was interested in ideas that would help develop the “retirement plan of tomorrow.”
Prudential came back later that year with an idea that would “take the best elements of the pension plan of the 20th century and combine it with the 401(k) and savings plans that were available at the time to offer the pension for the 21st century,” Hanney says. “That’s ultimately where we landed. If you think about how traditional pensions work, it’s pretty much on auto-pilot. Virtually everything is done for the employee who is in a traditional pension, apart from getting the job and coming to work every day.”
In the modern day 401(k) plan, almost every action is on the shoulders of the employee. The Pension Protection Act, which was passed in 2006, allowed companies like UTC to start incorporating some automatic features into its 401(k) plan,...