8-KEarnings & ResultsMaterial AgreementsExhibits & Filings

Aon plc 8-K Report, Material Agreement (Nov 2, 2006)

Filed November 2, 2006For Securities:AON

Summary

Aon Corporation's November 1, 2006, 8-K filing primarily announces significant changes to its U.S. and U.K. defined benefit pension plans, aimed at reducing future pension costs while maintaining competitive employee benefits. These modifications involve shifting from a final average pay formula to a career average pay formula for U.S. employees hired before January 1, 2004, effective January 1, 2007. For U.K. employees hired before January 1, 1999, future benefit accruals in defined benefit plans will transition to a defined contribution methodology, subject to trustee approval and member consultation, with an anticipated effective date in the first half of 2007. In addition to the pension plan adjustments, the company also issued a press release on November 1, 2006, detailing its financial results for the quarter and nine months ended September 30, 2006. While the specific financial results are not detailed within the 8-K itself, the filing indicates that these results were disseminated publicly on the same date. The pension plan changes are projected to yield annual expense savings of approximately $60 million, though the actual impact on 2007 pension expense will be influenced by various actuarial and market factors.

Key Highlights

  • 1Aon is modifying its U.S. and U.K. defined benefit pension plans.
  • 2The changes aim to reduce future pension costs for the company.
  • 3U.S. employees hired before January 1, 2004, will transition to a career average pay formula for future benefit accruals starting January 1, 2007.
  • 4U.K. employees hired before January 1, 1999, will move to a defined contribution methodology for future benefit accruals in their pension plans.
  • 5The proposed changes are expected to result in annual expense savings of approximately $60 million.
  • 6The filing also references a press release containing Aon's financial results for the quarter and nine months ended September 30, 2006.

Frequently Asked Questions

Aon is shifting from a final average pay formula to a career average pay formula for future benefit accruals for certain U.S. employees and is transitioning to a defined contribution methodology for future benefit accruals for certain U.K. employees. These changes are designed to reduce future pension costs.

For U.S. employees, the change to a career average pay formula for future benefit accruals is expected to take effect on January 1, 2007. For U.K. employees, the transition to a defined contribution methodology for future benefit accruals is anticipated to take effect during the first half of 2007, subject to trustee approval and member consultation.

No, the proposed changes will not affect pension plan benefits that participants have already earned prior to the effective date of these changes.

Aon expects these changes to result in annual expense savings of approximately $60 million. However, the actual 2007 pension expense will depend on several factors, including interest rates, foreign exchange rates, asset levels, asset return expectations, mortality assumptions, and the timing of the U.K. plan changes.