Chrysler freezes pension plan for 8,000 employees
Jul 21, 2015 at 12:46 PM
The U.S. automaker said it is making the move to stay in line with industry trends and to comply with IRS regulations.
The Auburn Hills-based company declined to detail the specifics of the IRS issue, but said it is currently in compliance. Company spokeswoman Shawn Morgan said the compliance matter is not related to underfunding of the pension.
U.S. companies in general have moved away from traditional, or "defined benefit," pensions due to the cost. General Motors made a similar move last year when it froze traditional pension benefits for 19,000 salaried workers hired before 2001. Such pensions guarantee a specific payment to retirees.
Chrysler said that all of its affected employees will be shifted to a defined contribution plan. It also lowered the age at which employees can begin claiming all of their retirement savings to 58 from 62.
The company closed its pension plans to new participants at the start of 2004. The freeze does not affect those hired from that point forward, or those who have already left the company or retired. All of the benefits accrued through Dec. 31 will remain in place, and employees will not lose what they have earned to that point.
Chrysler, majority owned by Italian company Fiat, has 65,500 employees worldwide. Last month, Fiat SpA reported a first-quarter loss, due in part to weaker sales at Chrysler.