Federally backed mortgage giants Fannie Mae and Freddie Mac are pulling the plug on their pension plan at the end of the year at the urging of their federal oversight agency, according to a memo the companies sent to staff Friday morning.
Company officials had frozen pension contributions earlier this year but decided to eliminate the programs altogether. The actions are being taken at the urging of the Federal Housing Finance Agency, which oversees Fannie and Freddie.
"FHFA has directed us to make these changes to manage the cost of the retirement benefits at a more predictable rate and to limit long-term liabilities," the memo said. The change takes effect Dec. 31.
Fannie Mae and Freddie Mac employ nearly 12,000 people.
Those enrolled in the pension plan will not lose the benefits they have accrued, and officials said they have "developed a transition plan to help ease the impact of this change," according to the memo.
Officials at Fannie Mae would not provide details on a transition plan.
"Payouts to pension plan participants will be made either in the form of a lump sum or an annuity," said Fannie Mae spokesman Andrew Wilson.
A spokesperson for Freddie Mac could not be reached for comment.
The FHFA issued a statement on its Web site saying it made the decision to eliminate risk to Fannie and Freddie and to help conserve their assets.
Fannie and Freddie went into federal conservatorship in 2008 under the FHFA after sustaining big losses in the housing market. Those losses resulted in a $ 187 billion bailout by the U.S. Treasury.
Fannie and Freddie will continue to pay the Treasury as a result of the bailout.
At the time they were notifying employees, Freddie and Fannie were filing the changes with the Securities and Exchange Commission.
Fannie Mae has reported a profit in the first quarter of 2012 and has turned a profit every quarter since.
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