GraceKennedy subsidiary Hardware & Lumber Limited has announced plans to cease participation in the group's defined benefits pension plan, offering in its place enrolment in a newer defined contribution (DC) plan also offered by the parent company.
The withdrawal is expected to be completed by the start of 2014.
H&L CEO Andrea Coy said that the hardware company is also looking to create its own pension plan.
"This is another in a series of steps to move H&L to greater independence and in time we expect H&L to have its own DC pension plan, but we need time to go through the regulatory and other processes before we can achieve that," said Coy.
"We are confident that this move will enhance the financial strength of our company, which will ultimately be to the benefit of all of our stakeholders, including staff and shareholders," said Coy in the company release.
GraceKennedy currently operates two schemes, but the defined benefits plan is closed to employees joining the company after 2010.
The group's pension fund is managed by another GK subsidiary, First Global Financial Services Limited (FGFS).
As at June 2013, the pension fund had assets valued at J$5.3 billion while post-employment liabilities for the period were listed as J$3.2 billion.
H&L currently employs 163 people across its offices in Kingston, as well as 10 Rapid True Value and five Agro Grace retail stores.
A release issued by the company on Thursday said the H&L board was guided by the fact that due to changes in accounting standards effective in 2013, the hardware company's balance sheet had taken on significant pension liability which would be removed on the company's exit from the defined benefits plan.
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Regarding the size of the liability to be removed, GraceKennedy said: "This is subject to accruals that would take place in 2013 and cannot be determined at this time."
The company explains that under the defined benefit pension plan, the retirement benefit - that is, the amount payable to employees on retirement - is guaranteed based on a formula that incorporates length of service and salary at retirement, and is not linked to the appreciation or depreciation in value of the assets of the underlying pension plan.
Under the defined contribution scheme, both the employer and employee contribute to an account set up on behalf of each employee.
At retirement, the employee's pension is based on the total funds in the individual's account, which is determined by the total contributions to the account and the investment returns on these investments.
GK said the employees will be able to join its defined contribution scheme immediately.
"They will be given details of the various options available to them," the company told Sunday Business. "Current pensioners will continue to receive their benefits under the DB scheme," it said.