General Motors is moving to reduce the company's pension costs by $26 billion. The automaker is offering around 42,000 of its salaried retirees and surviving beneficiaries a one-time lump-sum payment in lieu of their current monthly benefit. In addition, GM plans to shift its salaried pensions to Prudential Insurance Co. of America. All told, the move will cost the manufacturer between $3.5 billion and $4.5 billion, including funding the plan and purchasing an annuity contract from Prudential. GM holds one of the world's largest pension obligations in the world, currently worth around $134 billion.
The shift should cut the company's worldwide pension liabilities to around $106 billion, while salaried pension obligations will drop from $36 billion to $10 billion. Even so, the shift to Prudential and lump-sum payouts will do nothing to lessen the automaker's hourly pension burden. Currently, GM holds hourly pension plans with $71 billion in liabilities and $61 billion in assets, though the manufacturer said the salaried pension shift "sets a precedent for additional actions." Check out the full press release for yourself.
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GM Announces U.S. Salaried Pension Plan Actions
Offers lump-sums to many retirees; Prudential to assume monthly benefits

Expected $26 billion reduction in U.S. pension obligation

118,000 salaried retirees overall impacted; 42,000 offered lump-sum payment

No change to active employee benefits

DETROIT – General Motors Co. today announced that it will provide select U.S. salaried retirees a lump-sum payment offer and other retirees with a continued monthly pension payment securely administered and paid by The Prudential Insurance Company of America, a Prudential Financial, Inc. company.

The retirement plan actions will result in an expected $26 billion reduction of GM's U.S. salaried pension obligation.

Approximately 42,000 salaried retirees and surviving beneficiaries will be eligible to receive a voluntary single lump-sum payment option. GM plans to purchase a group annuity contract from Prudential under which Prudential will pay and administer future benefit payments to most of the remaining U.S. salaried retirees. The transactions are expected to be completed by the end of 2012, following completion of regulatory review. Prudential would then assume responsibility for the benefits covered by the agreement and begin making the benefit payments in January 2013.

"We appreciate the contributions our retirees have made to the company and we have taken great care in ensuring the security of their retirement benefits," said Cindy Brinkley, GM vice president of global human resources. "Many of our retirees will now have more flexibility to manage their retirement funds and we are confident that Prudential will provide outstanding service to those receiving a monthly payment."

Approximately 118,000 U.S. salaried retirees are impacted by these changes in different ways, depending on retirement date and eligibility. Salaried retirees eligible for the lump-sum payment will have until July 20, 2012 to make a decision on their payment options. The eligibility and pension options for the majority of retirees are:


Retired from GM on or after Oct. 1, 1997 and before Dec. 1, 2011.

Three choices:

One-time, single lump-sum payment.
Continue with current monthly benefit, payable by Prudential.
New form of monthly benefit (based on marital status) – single life annuity or joint and survivor monthly benefit, payable by Prudential.

Retired from GM before Oct. 1, 1997.

Continue with current monthly benefit, payable by Prudential.

Most active salaried employees and retirees who started receiving their pension benefits on or after Dec. 1, 2011.

Moved into new GM pension plan with same benefits. Lump-sum payment or monthly pension benefit available at retirement, payable by GM.



"We are delighted to be working with General Motors to help the company fulfill its promise of guaranteed lifetime income for retirees in the salaried retirement program," said Christine Marcks, president of Prudential Retirement, a business unit of Prudential Financial, Inc. "We have a strong track record in this area, having worked with companies and organizations since 1928 to provide guaranteed pension benefits for millions of retirees."

GM's anticipated cash contribution to its U.S. salaried pension plans to effect these actions will be in the range of $3.5 to $4.5 billion to help fund the purchase of the group annuity contract and to improve the funded status of the pension plan for active salaried employees. The final amount will be determined at the closing of the transactions.

GM expects to take net special charges in the range of $2.5 to $3.5 billion in the second half of 2012 and the ongoing annual impact to earnings will be approximately $200 million unfavorable due to a decrease in pension income.

"These actions represent a major step toward our objective of de-risking our pension plans and will further strengthen our balance sheet and give us more financial flexibility going forward," said Dan Ammann, senior vice president and CFO.

These pension changes do not affect GM salaried retirees' eligibility for post-retirement health care, life insurance and a vehicle discount.

As a result of the changes to the pension plan for salaried retirees, GM will establish a new plan for active salaried employees with the same provisions as the current plan. GM will terminate the current salaried pension plan. There is no impact on hourly retirees.

GM's retiree website, www.gmretiree.com, will include additional information on the pension changes to further assist salaried retirees.


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    • 1 Second Ago
  • 97 Comments
      MERLIN
      • 2 Years Ago
      like all other companies if they put your retirment in a locked account every payday it would never be a liability
      Loodyte1
      • 2 Years Ago
      I like pensions! I think all workers should have an opportunity to receive a pension. But, if you recall, they started out years back as "old age pensions". That's what I think they should be for-- safety and protection in your "old age", i.e., for when you don't work full time anymore. Therefore, I think ALL pensions, government, unions, firemen, postal workers, teachers, policemen etc., etc, and etc., should start to be paid at age 65 or whatever the social security commencement date is to be. Public sector pensions that start at age 50 +/- are unreasonable and too costly. They should be delayed. Let's get back to Old Age Pensions.
        rlog100
        • 2 Years Ago
        @Loodyte1
        When people collect pensions early, they are usually adjusted downward permanently to compensate for the earlier withdrawl.
      lithdoc
      • 2 Years Ago
      $26B/42k employees = ~620k per head! Are you serious!?
        lne937s
        • 2 Years Ago
        @lithdoc
        That isn't that much in terms of total obligation. Over 20 years of retirement, it would be $31k/year. 25 years, $25K/year. Not sure how they are calculating it, or how old the people they plan to buy out are, but it doesn't seem to be that much at all. But for all of us that do not get a pension, this should be a wakeup call. Retirement is expensive and you need to plan for contingencies. Too many people run up credit card debt and wait till their 40's or 50's to start investing for retirement... when it is already too late.
        davebo357
        • 2 Years Ago
        @lithdoc
        If you retired at 60 and lived to be 85 that's under 25k a year, which could be plenty or not nearly enough depending on your health needs in old age. I hear Honda is thinking about moving American production to Canada because of healthcare costs. If someone doesn't stand up to the healthcare industry in America they're just going to bankrupt us and all our corporations.
          dknowles60
          • 2 Years Ago
          @davebo357
          cat is moving production from canada to the us
          Gabbo
          • 2 Years Ago
          @davebo357
          How about standing up to AARP ? Most of this healthcare spending comes in the last year of life - maybe the freeloaders shouldn't get to bankrupt the system just cause they can ?
          Julius
          • 2 Years Ago
          @davebo357
          @ Gabbo: Doesn't that mean we'd need "death panels" to figure that out?
      GLORIA
      • 2 Years Ago
      DougNLilly are right on the mark. No one is a winner here except the CEOs and China !
      GLORIA
      • 2 Years Ago
      This is a way to make employees think they are getting a good deal. Most of the $$$$$$$$$ is now going to China. And to think we bailed out GM. What a bunch of suckers we are here in the United States of America ! China is a communist country and we ( USA ) can't give them enough business. Wake up people ! GM has already promised China most of the jobs.
      Mike
      • 2 Years Ago
      They should just go bankrupt get the corrupt commie unions out let a business take over and get back to competting.I cannot think about throwing my money away on a Caddy when I can buy a Ford and not worry about the cars future.
        darkness
        • 2 Years Ago
        @Mike
        Worst comment in history
          bolte3
          • 2 Years Ago
          @darkness
          Mike, best comment! though you don't have to worry about GM being around because if their are unions running it, basically voters for this administration, then they will be around.
        Kevin Holden
        • 2 Years Ago
        @Mike
        Agreed. Real Americans, buy real America.
      Kathryn
      • 2 Years Ago
      Yeah I love Obama's take on this in his message on TV for re-election He thinks every one in America works for GM or a major Car company
        Robert
        • 2 Years Ago
        @Kathryn
        And believing they work for the unions, he believes there vote is bought and paid for
      lasml
      • 2 Years Ago
      They still have not paid back the money that Obama gave them. Plus Obama is out there talking against Mitt about people losing their jobs from his companies he bought (but not telling about all the jobs he created) while GM closed dealerships all over the country when they were bailed out and non union people by the thousands lost their jobs because of it and not this. Yea, right, gm is doing great. This President has to go.
        Sj027
        • 2 Years Ago
        @lasml
        Closed *white, male owned dealerships* while propping up *minority and women* owned dealerships. Two successful, longtime, Chrysler dealerships were forced to close down in my area, and I personally know a handful of people who have suffered of the forced closings. I don't hear Obama bragging about that much, or worse I never hear Romney pointing out Obama's shortcomings, just that he think's Obama's a nice guy with a 'few' differences. Sounds a bit like McCain all over.
          axiomatik
          • 2 Years Ago
          @Sj027
          The Big 3 had too many dealerships, and still do. When 1 Toyota dealer sells as many cars as 3 separate GM dealers, guess which dealer will have more money to advertise, to keep plenty of inventory on the lot, to keep the showroom fresh and up-to-date? Small dealers are at a competitive disadvantage compared to large dealers.
        • 2 Years Ago
        @lasml
        [blocked]
      Polly Prissy Pants
      • 2 Years Ago
      Man, whether you were union or not, working for GM was one sweet gig back in the day. Almost as good as working for the government. Big juicy pension, "post-retirement health care, life insurance and a vehicle discount", plus a nice salary while you're there. I work for a Fortune 100 corporation and you know what I'll get after 40 years? A nice hearty handshake and a box to pack my things.
        metusmetu
        • 2 Years Ago
        @Polly Prissy Pants
        Well, here's hoping you saved a healthy some of money over those 40 years Ms. Polly. You're going to need it.
      Kathy
      • 2 Years Ago
      Hourly pension obligation, not burden. Those workers earned their pensions.
      cindy
      • 2 Years Ago
      hmmm.......maybe we should have let them fail so that they could have gotten out of their current union contracts? Then maybe they could have hired people that were grateful to have a job and would work hard instead of the union cream puffs who are too busy whining about how they need more benefits and paid leave? But hey that's just capitalism and we are now a socialist country where the companies are "too big to fail" and must be run by the government.....what a joke
        • 2 Years Ago
        @cindy
        [blocked]
      frankmyers
      • 2 Years Ago
      How much does GM still owe the US from the loans that it received from the government?
        rlog100
        • 2 Years Ago
        @frankmyers
        Nothing. Obama didn't use loans which would have obligated GM to pay it back. The control freak took stock instead. Now should GM makeup the shortfall when the government sells out their stock. Probably. Who will make that decision? Wallstreet. What do you think their thoughts will be? "We can afford to give the government $10 billion dollars to get rid of this cloud over GM's reputation. Or,we can pocket it ourselves." I'm pretty sure I know how the stockholders will decide.
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