The changes include phasing out the Chicago-based company’s pension plan, eliminating stock options for all but the upper echelon and reducing bonuses. Pay raises are also in the mix for approximately 20% of the hourly employees for the nation’s largest department store chain, according to a Bloomberg News report.
Salaried employees will transition into the new stock option and bonus systems over two years beginning in 2005.
Under the pension phase out plan, workers younger than age 40 will be shifted out of Sears’ defined benefit plan to a matching 401(k) plan beginning in 2005. The company’s contribution to each employee’s plan account would be increased from the current match of 3.5% to 5.5% while all accrued pension benefits would be maintained in the new Section 401(k) structure.Employees aged 40 and older will have the option of shifting into the Section 401(k) system or maintaining their defined benefit pension benefits.
In addition, Sears plans to end health-care coverage subsidies for future retirees. Instead, future retirees will have the option of purchasing coverage through Sears’ group plan. The company will limit health care plan subsidies at this year’s levels for future retirees who are now age 40 or older.
The company did not disclose the potential costs savings of the compensation restructure.