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PEORIA, Ill.—Construction equipment maker Caterpillar Inc. is freezing its defined benefit pension plan for nonunion employees and sweetening its 401(k) plan.
Nonunion employees hired on or after Jan. 1, 2011, will not be eligible for the defined benefit plan. In addition, the effective date of the freeze for current employees will vary based on their age and when they were hired, a Caterpillar spokeswoman said.
However, Peoria, Ill.-based Caterpillar said it will continue to match 100% of nonunion employees' 401(k) plan contributions, up to the first 6% of pay. In addition, for employees not earning benefits in the pension plan, it will provide an additional 401(k) plan contribution based on an employee's age and years of service.
The pension freeze will affect about 28,000 of Caterpillar's 50,000 employees in the United States, the spokeswoman said, adding that she did not have any information on possible cost savings as a result of the plan freeze.
The Caterpillar spokeswoman said the company is “making the transition” to 401(k) plans “in light of a continuing trend among large 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.”
As of mid-May, just 42% of Fortune 100 companies offered a defined benefit pension to new salaried workers, according to a Towers Watson & Co. analysis. That is down from 83% as recently as 2002.