GE Freezes Pension Plan
General Electric Co. said it was freezing its pension plan for about 20,000 U.S. workers and offering pension buyouts to 100,000 former employees, as the conglomerate joins the ranks of U.S. companies phasing out a guaranteed retirement.
GE is one of the rare big U.S. manufacturers that still allows salaried workers to accrue traditional pension payments, though it closed its plan to new participants in 2012. The company’s profits have evaporated in recent years, prompting GE to slash its dividend and Chief Executive Larry Culp to look for ways to pare its debts.
GE’s traditional pension and post-employment benefits programs, which were underfunded by $27 billion as of the end of 2018, are one of the company’s biggest liabilities. The company said the latest changes could reduce its pension deficit by as much as $8 billion.
The company said it will use some of the money it has received from the sale of its BioPharma, BHGE and Wabtec transactions to pre-fund up to $5 billion of its Employee Retirement Income Security Act payments for 2021 and 20212. Retired employees who have not started receiving monthly payments will have the option to receive a one-time lump-sum payout.
General Electric, once an industrial icon, is in the midst of trying to engineer a turnaround after shares lost more than half their value amid a slew of problems last year. The battered company has undertaken a massive restructuring plan aimed at reducing debt by selling off non-core assets. In August, the company was accused by whistleblower Harry Markopolos, who alerted authorities about Bernie Madoff’s Ponzi scheme, of hiding its problems through fraudulent accounting.
GE’s post-employment liabilities include about $4.8 billion in retiree health benefits and about $6.1 billion in supplemental pensions for executives and other highly paid employees. In 2015, GE stopped supplemental health-care plans for many retirees and substituted a subsidy for private coverage. That change, plus a reduction in retiree life insurance, cut obligations by $3.3 billion.