IBM zigs, 3M zags.
While IBM made big waves in the retirement plan world last November by announcing it was halting company contributions to 401(k) plans in favor of a new “Retirement Benefit Account” within the existing IBM Personal Pension Plan, another corporate American giant, St. Paul, Minn.-based 3M, is going a different direction with its workplace retirement plan strategy.
3M announced Monday that it will freeze its U.S. pension plans for non-union U.S. employees, effective in 5 years (Dec. 31, 2028), furthering its gradual move from a defined benefit pension structure to a 401(k) retirement plan structure.
In 2009, the company closed Portfolio II of the U.S. pension plan to new hires and rehires. By moving to a 401(k) structure, the company said in a statement it is focused on providing employees with more flexibility and control when it comes to investing in their future.
“We are providing five years of advance notice to ensure our employees can plan alternative strategies to meet their post-retirement income needs.”
3M Chairman and CEO Mike Roman
“This is an important decision for 3M as it helps to set up both companies for future success. This was also a difficult decision because it impacts employees across the United States. To help those impacted, we are providing five years of advance notice to ensure our employees can plan alternative strategies to meet their post-retirement income needs,” said 3M Chairman and CEO Mike Roman.
Pension-eligible 3M employees will continue to accrue benefits under the pension plans until the freeze date. This decision applies to both 3M and the future, independent health care company’s U.S. pension plans.
The company also clarified that former employees with vested pension benefits, 3M or 3M Health Care retirees, and those currently receiving pension annuity payments are not impacted by this action.
Business and economy news website Quartz reports that fewer than 9,000 active participants in the 3M pension plan are affected by the move—a relatively small percentage considering the company’s 92,000 worldwide employee headcount. This is due to 3M closing the pension plan to new hires back in 2009.
At that time, 3M began matching employee contributions up to 6% and contributing 3% of pay toward a retirement account.
In 2022, 3M transitioned administrative services for U.S. active and retiree health benefits, pension, 401(k) and deferred compensation plans from Alight to Willis Towers Watson, Empower and Newport, respectively.
This week’s pension news may be discussed further in 3M’s fourth quarter 2023 earnings conference call, scheduled for 8 a.m. CST on Jan. 23, 2024. The earnings call can be accessed at (800) 762-2596, and will also be webcast live with replay available on 3M’s Investor Relations website at http://investors.3M.com.
Roman in line for $26 million pension
Not coincidentally, Brett Arends of MarketWatch reported today that 3M leader Roman has received a $19.3 million boost to his company pension (and other nonqualified deferred compensation plans) in recent years, citing statement filed to the SEC.
“This has left him in line for a company pension so gigantic that the present value is $25.8 million—enough to generate a guaranteed lifetime income of $165,000 per month,” Arends writes.
Since taking over as CEO in 2018, Arends writes that Roman has been paid $65 million in cash, stock, options and other benefits—not including 2023’s pay or pension benefits, which won’t be disclosed until this spring.
SEE ALSO:
• IBM Replacing 401(k) Match with 5% ‘Retirement Benefit Account’ Contribution
• What’s Behind IBM’s Move to Unfreeze its DB Plan with Cambridge Associates’ Brian McDonnell
• IBM 401(k) Replacement Elicits Questions from Retirement Leaders
• UAW Strike Settlements: No Comeback for Pensions, But 401(k)s Get Big Boost
• Global Pension Assets Record Biggest Fall Since 2008