General Motors Co. (GM) 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 company said that the retirement plan actions will result in an expected $26 billion reduction of its 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 said.
GM said it 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.
The company stated that Prudential would then assume responsibility for the benefits covered by the agreement and begin making the benefit payments in January 2013.
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 company said.
GM said its anticipated cash contribution to its U.S. salaried pension plans to effect these actions will be in the range of $3.5 billion 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.
The company expects to take net special charges in the range of $2.5 billion 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.
GM noted that the pension changes do not affect its salaried retirees' eligibility for post-retirement health care, life insurance and a vehicle discount.
GM stated that as a result of the changes to the pension plan for salaried retirees, it will establish a new plan for active salaried employees with the same provisions as the current plan. GM added that it will terminate the current salaried pension plan. There is no impact on hourly retirees.
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