Oct 1, 2014 4 min read

Consol Energy, one of the area’s largest private employers, announced Wednesday sweeping changes to its employee retirement benefit programs.

During a telephone interview, Brian Aiello, Consol’s director of communications, and Kurt Salvatori, vice president of human resources, outlined changes that will affect retiree medical benefits for about 4,200 active employees in both salaried and hourly positions, as well as about 4,400 retirees and their spouses.

The change also affects the company’s pension program, in which all active employees are currently enrolled.

Aiello said the changes are part of Consol’s ongoing transformation, which began several years ago when the company announced it was beginning to hire new employees as those in the baby boom generation approached retirement.

“We’re modernizing the way pensions, retiree health-care benefits for retirees and (benefits for) future retirees of the company” are administered, Aiello said, adding employees and retirees were to learn of the changes during the day Wednesday.

According to Salvatori, Consol’s goal is to move from a defined-benefit plan, or pension, to a defined-contribution, or 401(k) plan, for its active employees.

“We are going to transition the company to be a 401(k)-only company,” he said.

The changes announced Wednesday also affect the company’s retiree medical plan, which until Wednesday was offered to both active and retired employees.

For the retiree medical plan, Salvatori said the company created a “glidepath” so all retirees will remain on the benefit plan until January 2020.

“It will give people appropriate time to make plans” to move to Medicare coverage when they turn 65 years old and Consol’s medical coverage becomes supplemental.

Aiello said the company estimated between 85 and 90 percent of its retirees will reach Medicare age by 2020.

At that time, they can pick up a supplemental policy to the Medicare coverage, he said.

For active employees, “we will no longer offer the retiree medical benefit as of today,” he said.

For approximately 3,300 active employees, the company is providing a one-time cash payment later this month based upon years of service.

Aiello said the company will distribute a total of $50 million in the following fashion:

Employees with 30 years of service will receive $100,000; those with between 25 and 30 years of service, $75,000; and people with 20 to 25 years of service, $50,000. That money is taxable.

The payouts will continue in declining order to those with fewer years of service, with those with less than five years receiving $2,500.

Salvatori, who called the payments “substantial,” said they were intended to help those still working to prepare for medical coverage in retirement.

“(The payouts) should be able to get them to Medicare age if they retire by 65,” he said.

As of Wednesday, Salvatori said, all active employees were in the company’s pension plan but can also participate in its 401(k) plan, for which Consol matches the first 6 percent of an employee’s contribution.

Under the transition plan described by Salvatori, all employees over age 40 with 10 years of service will remain in the pension plan and continue to receive the 6 percent match in their 401(k).

For all other employees, the company will freeze their pension benefit at its current amount, will continue to provide the 6 percent 401(k) match, and will make an additional 3 percent contribution above the match amount for a total of 9 percent.

He said the average company contribution toward 401(k) plans is 3.86 percent, which would put Consol at 150 percent above the average.

Aiello said the changes were being made to bring Consol into line with how other U.S. companies of comparable size administer benefits.

He noted national surveys show that in 1988, 66 percent of companies were providing retiree medical benefit plans, while by 2013, the number fell to 28 percent.

Private-sector participation in pension (defined-benefit) plans was at 38 percent in 1980, but down to 16 percent in 2013.

Conversely, in 1980, only 8 percent of companies offered defined-contribution plans, such as a 401 (k), but by 2013, 42 percent were offering them.

Aiello noted when looking at companies of Consol’s size, it surveyed Fortune 100 companies, of which 90 percent have defined-contribution plans.

“People entering the workforce today look for a 401(k),” Salvatori said. “It’s portable, it’s easy to understand, and people see the money going into their account.”

“The decision to make these changes did not come without careful analysis and thoughtful consideration as to the impact on current and future employees of Consol Energy, as well as our retirees,” Aiello said.

“We are making these changes in a responsible way to both protect and invest in our greatest asset, our people, and to position the company to be able to attract the necessary talent to continue to compete and thrive in a very competitive and rapidly changing energy landscape.

“We’re adjusting to change but doing it in a way that responds to everybody’s needs.”