DETROIT (Reuters) - Chrysler Group LLC, the U.S. automaker controlled by Italy’s Fiat, will freeze its U.S. pension plans for some 8,000 white-collar workers hired before 2004 on December 31.
Those employees will be shifted to a plan similar to a 401(k) that is offered to salaried workers hired over the last decade, the third-largest U.S. automaker said on Friday.
The move reflects a broader trend of adopting defined contribution plans, which represent a lower risk to companies compared to traditional pension plans. At the end of 2012, Chrysler’s pension plans were underfunded by $8.9 billion.
Last year, General Motors Co made a similar decision to end traditional pension benefits for 19,000 salaried workers hired before 2001.
Chrysler said it decided to make the change partly to comply with U.S. tax regulations.
“We are in compliance today, but as we did an assessment of our pension plans, we decided to make this change,” Chrysler spokeswoman Shawn Morgan said.
Chrysler said worker benefits earned through the end of the year will be retained. The freeze does not affect workers hired after 2004, current retirees or former Chrysler employees.
Chrysler is also allowing retirement-eligible workers to access the full amount of their pension benefits at age 58, rather than age 62. The automaker will also provide free financial counseling to those workers for six months.
New white-collar hires have not received pension benefits since 2004 when Chrysler shifted strategies head off “unpredictable financial costs,” said Nancy Rae, Chrysler’s senior vice president of human resources, in a statement.
Reporting by Deepa Seetharaman; Editing by Lisa Von Ahn, Phil Berlowitz and Sofina Mirza-Reid