8-KLeadership ChangesRegulation FD

DOW INC. 8-K Report, Executive Changes (Mar 4, 2021)

Filed March 4, 2021For Securities:DOW

Summary

This 8-K filing from Dow Inc. (DOW) on March 4, 2021, primarily announces significant changes to the company's U.S. retirement programs, impacting both defined benefit and defined contribution plans. Effective December 31, 2023, benefit accruals in the U.S. tax-qualified and non-qualified defined benefit plans, including the Dow Employees’ Pension Plan (DEPP) and the Executives’ Supplemental Retirement Plan (ESRP), will be frozen. Participants will retain benefits accrued up to that date. Concurrently, the company is modifying its defined contribution plan (401k) matching contributions for all eligible U.S. employees starting January 1, 2022, and introducing an automatic 4% non-elective contribution beginning January 1, 2024. Dow also expects to make a voluntary contribution of approximately $1 billion to its U.S. pension plans in Q1 2021, which is estimated to reduce the projected benefit obligation by $350-$375 million and improve the funded status by approximately $1.35 billion, resulting in a pre-tax curtailment gain of about $20 million.

Key Highlights

  • 1Benefit accruals in U.S. defined benefit pension plans (DEPP, ESRP) to be frozen effective December 31, 2023.
  • 2All benefits accrued up to the freeze date will be retained by participants.
  • 3New matching contribution structure for defined contribution (401k) plans begins January 1, 2022, with a maximum match of 5% of eligible compensation.
  • 4Automatic 4% non-elective contribution to defined contribution plans for all eligible U.S. employees starting January 1, 2024.
  • 5Dow to make a voluntary contribution of approximately $1 billion to U.S. pension plans in Q1 2021.
  • 6Estimated reduction in projected benefit obligation of $350-$375 million and improvement in funded status of approximately $1.35 billion due to the contribution and plan freeze.
  • 7Expectation of a pre-tax curtailment gain of approximately $20 million in Q1 2021.

Frequently Asked Questions

For employees participating in the U.S. defined benefit pension plans, future benefit accruals will cease as of December 31, 2023. For defined contribution plans, the matching contribution structure is being standardized and a new automatic contribution will be introduced. All accrued pension benefits up to the freeze date will be protected.

Dow expects a reduction in its projected benefit obligation for U.S. pension plans by $350-$375 million and an improvement in funded status by about $1.35 billion. A pre-tax curtailment gain of approximately $20 million is anticipated in the first quarter of 2021. Annual benefit costs are expected to decrease by $140-$160 million in 2021, though this will be partially offset by increased expenses related to defined contribution plans starting in 2022.

The freeze affects active employees who are participants in the U.S. defined benefit plans (including DEPP, UCEPP, ESRP, and other legacy non-qualified pension plans). Approximately 14,400 active employees are impacted. Retirees already collecting benefits and former employees with vested benefits are not affected.

The voluntary contribution is made to the U.S. pension plans in the first quarter of 2021 and is intended to help improve the funded status of these plans, in conjunction with the freezing of future benefit accruals.