Chrysler Group is planning to put freeze by the end of 2013 its pension plans for around 8,000 white-collar workers in the United States who were employed before 2004. According to Chrysler, the workers will be moved to a plan similar to a 401(k) that is offered to salaried employees hired over the last decade.
The carmaker’s move reflects the trend of adopting defined contribution plans, which provide lower risk compared to traditional pension plans. At the end of 2012, Chrysler's pension plans were underfunded by around $8.9 billion. In 2012, General Motors Co. decided to terminate traditional pension benefits for around 19,000 salaried employees hired before 2001.
According to Chrysler, the decision was partly to meet U.S. tax regulations. Chrysler spokeswoman Shawn Morgan remarked that although the carmaker is in compliance with tax regulations today, they decided to make the change after assessing their pension plans.
The carmaker said that worker benefits earned through the end of 2013 will be retained. The freeze, however, will not affect workers hired after 2004, current retirees or former Chrysler employees. Chrysler is also letting retirement-eligible employees to access the full amount of their pension benefits at age 58, rather than age 62.
The carmaker will provide free financial counseling for workers for six months. New white-collar workers have not received pension benefits since 2004, when the carmaker shifted strategies to head off "unpredictable financial costs," according to Chrysler's senior vice president of human resources, Nancy Rae. [source: Reuters]