ITW Retirement Benefits: 401(k), Pension, and NUA Strategy

ITW retirement benefits come in two forms: a 401(k) savings plan that most current employees use to build their nest egg, and a legacy defined benefit pension that still pays long-tenured workers and retirees who qualified before the plan closed to new hires. The 401(k) enrolls you automatically at 6% of pay, offers a company match on the first 6% you contribute, and vests that match immediately. The pension pays a formula-based monthly benefit funded entirely by ITW.

How the ITW 401(k) Works

New hires can participate in the ITW Savings and Investment Plan right away. If you take no action, the plan enrolls you at a 6% deferral rate and raises that rate by 1% each year until you opt out or reach the plan ceiling.¹ You can contribute pre-tax, Roth, or traditional after-tax, which gives you room to plan around your current and expected future tax rates.

ITW matches a portion of the first 6% of pay you contribute. The exact formula varies by business unit, but the company match is 100% vested from day one, so you keep every dollar even if you leave shortly after starting.¹ Many large employers impose a multi-year schedule on matching contributions, so immediate vesting here is worth noticing.

Bargaining-unit employees follow different rules. The ITW Bargaining Savings and Investment Plan generally requires six months of service before enrollment, and company contributions follow the terms of the applicable collective bargaining agreement.²

2026 Contribution Limits

For 2026, you can defer up to $24,500 of your own pay into the ITW 401(k). If you turn 50 or older by year-end, you can add $8,000 in catch-up contributions for a personal maximum of $32,500.³

SECURE 2.0 created a higher catch-up window for participants ages 60 through 63. If you fall in that range during 2026, your catch-up limit is $11,250 rather than $8,000, bringing your total to $35,750.³ Once you turn 64, the standard $8,000 catch-up applies again.

Starting with the 2027 tax year, employees who earned $150,000 or more in the prior year must make all catch-up contributions on a Roth basis. Some plans may adopt the rule early, so check with the plan administrator if you are a high earner planning catch-up contributions in 2026.⁴

Investment Choices

The plan offers two paths. Path 1 uses ITW Target Retirement Funds, which shift automatically from stocks to bonds as your target date approaches. You pick the fund closest to your expected retirement year, and the fund manager handles the allocation. Path 1 also lets you invest up to 20% of your balance in the ITW Common Stock Fund.¹

Path 2 is self-directed. You build your own portfolio from a set of core funds, including the ITW Common Stock Fund, which holds only ITW shares. Concentrating retirement savings in your employer’s stock carries real risk: you already depend on the company for a paycheck, and a downturn hits your income and your savings together. Most planners suggest keeping company stock under 10% of your total retirement portfolio. You can change investment elections or transfer between funds at any time.

The Defined Benefit Pension

The ITW pension is separate from the 401(k). Instead of building a personal account, the pension promises a monthly payment in retirement based on a formula tied to your credited service and compensation history. ITW funds it; nothing comes out of your paycheck. The plan is generally closed to new hires but continues to pay employees who accrued benefits during the eligible period.

At retirement, you choose your payout:

Annuity payments for life. If you are married, the default is a joint and survivor annuity that continues a reduced benefit to your spouse after your death.
A single lump sum representing the present value of the future benefit, which you can roll into an IRA or the ITW 401(k) to preserve tax deferral.

Federal law makes the joint and survivor annuity the default for married participants. Choosing anything else requires your spouse’s written consent, witnessed by a plan representative or notary public.⁵ Once payments begin, the waiver is irrevocable, so treat that signature seriously.

PBGC Backstop

The pension is insured by the Pension Benefit Guaranty Corporation. For 2026, the PBGC guarantees a maximum monthly benefit of $7,789.77 for a 65-year-old receiving a straight-life annuity, and $7,010.79 per month for a joint and 50% survivor annuity (assuming both spouses are the same age).⁶ If your pension calculates below those caps, the full amount is protected.

Getting to Your Money While Still Working

Two options exist for tapping the 401(k) before you leave: loans and hardship withdrawals. Both carry real costs.

Plan Loans

You can borrow from your vested balance up to the lesser of $50,000 or half your vested balance, with a $10,000 floor.⁷ The plan allows up to three loans outstanding at once, but only one new loan per 12-month period.¹

Repayment runs through payroll deduction, with interest going back into your own account. Fall behind on payments or leave the company with a balance outstanding, and the unpaid amount becomes a taxable distribution. That means income tax on the full amount plus a 10% early withdrawal penalty if you are under 59½. The hidden cost is the return you forgo while the borrowed money sits outside the market.

Hardship Withdrawals

If you face an immediate and heavy financial need, the plan may allow a hardship withdrawal. Unlike a loan, this money is not repaid. The IRS recognizes seven qualifying categories: unreimbursed medical expenses for you, your spouse, or dependents; costs of buying your principal residence; tuition and related fees for the next 12 months of post-secondary education; payments needed to prevent eviction or foreclosure on your primary home; funeral or burial expenses; certain repair costs for casualty damage to your principal residence; and expenses from a federally declared disaster affecting your home or workplace.⁸

The withdrawal is limited to the amount you actually need. It counts as taxable income, and if you are under 59½ you will likely owe the 10% early withdrawal penalty on top. Federal rules no longer require you to exhaust plan loans first, but the ITW plan’s own rules may still impose extra steps, so check the summary plan description before assuming you can skip that.⁹

Net Unrealized Appreciation on ITW Stock

If you hold significant ITW stock inside the 401(k), a tax strategy called net unrealized appreciation (NUA) may save you real money. When you take a lump-sum distribution of the actual shares rather than selling inside the plan and rolling cash to an IRA, you pay ordinary income tax only on the original cost basis. The appreciation above that basis is taxed at long-term capital gains rates when you eventually sell the shares, regardless of how long you hold them after distribution.¹⁰

To qualify, you must take a lump-sum distribution of the entire balance from all employer plans of the same type in a single tax year, triggered by leaving the company, reaching 59½, becoming disabled, or death. The strategy pays off most when your shares have appreciated substantially and your cost basis is low. When appreciation is modest, a straightforward IRA rollover may be simpler. Running the numbers with a tax professional before you take the distribution is worth the fee.

What to Do With Your 401(k) When You Leave

Your vested balance belongs to you once you separate from ITW. You have four choices:

Leave it in the ITW plan, allowed if your balance is $1,000 or more.¹
Roll it into your new employer’s plan, if that plan accepts incoming rollovers.
Roll it into a traditional or Roth IRA for a wider range of investment choices.
Cash out. Usually the worst option: the plan must withhold 20% for federal income tax on any distribution not directly rolled over, and you may owe additional tax plus the 10% early withdrawal penalty at filing time.¹¹

If your balance is under $1,000 and you do not elect a rollover, the plan cashes you out automatically. The 20% withholding applies, and you have 60 days to deposit the money into an IRA yourself to avoid the tax hit. People miss that window more often than you would expect.

For the pension, contact the plan administrator to start your benefit. You can begin payments immediately or defer them. The lump-sum-versus-annuity choice and spousal consent rules described above apply.⁵

Required Minimum Distributions

Both the 401(k) and the pension are subject to required minimum distributions. When you must start depends on your birth year:

Born 1951 through 1959: RMDs must begin by April 1 of the year after you turn 73.
Born 1960 or later: RMDs must begin by April 1 of the year after you turn 75, effective starting in 2033.

¹²

If you are still working at ITW past your RMD age, the 401(k) generally allows you to delay distributions until you actually retire. The pension may require payments to begin at normal retirement age regardless of your employment status, so check the plan documents.

Miss an RMD and the excise tax is 25% of the shortfall. Correct the mistake within the two-year correction window and it drops to 10%.¹³ SECURE 2.0 lowered these from 50%, but 25% on top of regular income tax still stings. Set a yearly calendar reminder.

Beneficiaries and Survivor Protection

Your beneficiary designation on the 401(k) decides who receives your account if you die before spending it. For married participants, federal law automatically names your spouse. Naming anyone else requires your spouse’s written consent, witnessed by a plan representative or notary public.⁵

Beneficiary forms override your will. If you named an ex-spouse during a first marriage and never updated the form, that ex-spouse receives the money, not your current spouse or children. Review your designations after marriage, divorce, the birth of a child, or a spouse’s death.

The pension carries a separate protection: a qualified preretirement survivor annuity. If you die before starting pension payments, your surviving spouse receives a survivor benefit. This is a federal requirement, not something ITW can waive.⁵

Retiree Health Coverage

If you leave ITW before 65, you face a gap between employer coverage and Medicare. COBRA lets you continue your group health plan for 18 to 36 months depending on the qualifying event, but you pay the full premium plus a 2% administrative fee.¹⁴ The premium can startle you because ITW previously covered a large share of the cost.

Retirees who are at least 55 with 10 or more years of service may qualify for the ITW Retiree Health Care Contribution Plan, which provides monthly credits toward retiree medical coverage.¹ If you are close to those thresholds, the timing of your departure matters. Leaving a few months early can cost you years of subsidized coverage.

1
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2
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