3M Co., the health care and consumer goods company, announced Monday that it will freeze all U.S. pension plans for nonunion employees, effective December 31, 2028, moving employees to the company’s 401(k) plan.
The company stated it is focused on “providing employees with more flexibility and control” by moving to a 401(k) retirement plan structure.
Pension-eligible employees at the St. Paul, Minnesota-based company will continue to accrue benefits under the pension plans until the freeze date. Former employees with vested pension benefits, 3M or 3M Health Care retirees, and those currently receiving pension annuity payments are not impacted by the decision, according to a press release.
3M’s decision to freeze a defined benefit plan comes just a few months after IBM’s announcement that it will do the complete opposite—scrap its 401(k) plan and revert to a cash balance plan. As of January 1, IBM no longer provides a 5% match and 1% automatic contribution into an employee’s 401(k), but rather directs 5% of each employee’s salary into a “Retirement Benefit Account.”
The move from a pension plan to a 401(k) plan has been “underway at 3M for many years,” the press release stated. In 2009, the company closed Portfolio II of its U.S. pension plan to new hires and rehires.
“This is an important decision for 3M as it helps to set up both companies for future success,” said 3M Chairman and CEO Mike Roman in a statement. “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.”
The pension freeze applies to employees of 3M and Solventum, the independent health care company which will be spun off from 3M in the first half of 2024.3M disclosed plans to spin off its health care business into a listed company last year; 3M intends to retain a 19.9% stake. This decision occurred amid litigation from military members who used 3M’s allegedly defective earplugs.
3M has company-sponsored retirement plans covering substantially all U.S. employees and many employees outside the U.S. In total, 3M has more than 75 defined benefit plans in 28 countries, according to its 2023 annual report. The company’s 2022 annual report revealed that 3M’s primary U.S. qualified pension plan is 97% funded and that in 2023, 3M had planned to contribute between $100 million and $200 million toward its global pension and postretirement obligations.
The 2022 fair value of qualified and non-pension benefits was $12.65 billion at the end of the plan year.
Employees hired on or after January 1, 2009, receive a cash match of 100% for employee 401(k) contributions of up to 5% of eligible compensation and receive an employer retirement income account cash contribution of 3% of the participant’s total eligible compensation.
Employer contributions to the U.S. defined contribution plans were $241 million, $231 million and $201 million for 2022, 2021 and 2020, respectively. Employer contributions to the international defined contribution plans were $108 million, $117 million and $103 million for 2022, 2021 and 2020, respectively.
Tags: 3M, 401(k), Defined benefit (db) pension plans, frozen pension plan, Mike Roman
