Expecting to save $25 million a year, Sears Canada Inc. is adding a defined contribution (DC) component to its pension plan and reducing post-retirement benefits for employees.

“To align with peer Canadian companies in the retail sector, the company will no longer provide post-retirement medical, dental and life insurance benefits for associates who have not achieved the eligibility criteria for these benefits by Dec. 31, 2008,” the department store chain said today.

The company also said it will amend its pension plan effective July 1, 2008, by introducing a defined-contribution component.

“Contributions by associates towards defined benefits will be discontinued and associates will keep all pension benefits accrued up to and including June 30, 2008, in the existing defined-benefit component of the plan,” the firm said.

“After this date, compensation growth in future years will continue to be included in the calculation of the defined-benefit component of the pension although no further service credit will be earned.”

“This pension redesign will keep Sears Canada in step with the way retirement plans have evolved in Canada while still ensuring that a competitive plan exists for our associates that is in alignment with the Canadian retail industry,” CEO Dene Rogers said in a news release.