CIGNA Corp. plans to freeze its pension plan, effective July 1, while boosting its 401(k) plan benefits for all of its employees.

The Philadelphia-based insurer’s pension plan freeze should save about $40 million a year. It will affect about 26,000 employees, but none of its 40,000 retirees, according to news reports.

Company officials said the change is designed to bring its retirement plan package in line with its competitors. Officials recognized its package was “significantly higher” in value than other health insurers, news reports said.

CIGNA, like other health insurers, is suffering through the recession, as employers trim payrolls, meaning fewer employees are eligible to enroll in health plans. CIGNA predicted earlier this month that enrollment will drop 3% to 4%, an update on a prior forecasted 3% decline. Its membership slid 2.7% in the first quarter, to 11.4 million. In January, it announced it would cut 1,100 jobs, or 4% of its workforce, this year.

CIGNA officials said its employees will stop earning new pension benefits, beginning July 1. Its current plan participants will keep the benefits they have earned and their account balances, as well as interest. CIGNA plans to take a one-time accounting credit of $39 million in conjunction with the change.

The managed care company also said it will fully vest all employees who are not yet vested July 1. The vesting applies to anyone employed by CIGNA April 1.

The company also said it will match 100% of employees’ deferrals, up to the first 3% of pay, and match 50% of employee deferrals on the next 3% of pay, starting Jan. 1, 2010. It has been matching 50% of contributions, up to the first 6% of pay.

New employees who join the 401(k) plan will be immediately eligible rather than having to complete a year of service before becoming eligible. Employees will fully vest in matching contributions after two years of service, not the current five.

Last week, financial service firm Wells Fargo & Co. announced it will freeze its cash balance plan, starting July 1.