Most current employees will have their pensions frozen when the change takes effect, Caterpillar spokeswoman Bridget Young said, according to the Peoria Journal Star. The change will not affect union members because new hourly employees began getting 401(k) contributions rather than defined pension benefits with the current contract, which was ratified in January 2005.
Under the 401(k) plan, Caterpillar will offer a company match of employee deferrals up to 6% of salary, in addition to an annual contribution of a certain percentage of the employee’s salary, based on the person’s age and years of service.
The change affects approximately 28,000 U.S. management, support, and non-bargained employees who participate in certain retirement income plans. That’s more than half of Caterpillar’s total U.S. employment of roughly 50,000 people.
Young said affected employees soon will receive details about the change that are specific to their personal situations, as well as models of different retirement income scenarios through which they can better understand the changes and their options.
“Caterpillar is making this transition in light of a continuing trend among U.S. companies to migrate from defined benefit plans to defined contribution plans as their predominant retirement-income benefit and to strengthen Caterpillar’s competitive position in the global marketplace,” a company statement said, according to the news report.
Young said Caterpillar frequently benchmarks industry trends on benefits and found that only 30% of the country’s large companies – and only 17 of the Fortune 100 – still offer traditional pension plans to their new employees.