GM Pension Plans
March 8th, 2006 by admin
GM cuts employee’s pension plans
After a difficult year, GM is announcing changes in employee’s pension plans. This should come as no surprise, almost all companies that "restructure" cut their employee’s pensions to save money.
Effective Jan. 1, GM will freeze the accrued pension benefits for approximately 40,000 U.S. salaried employees. The change won’t affect retirees.
Salaried employees hired on or after Jan. 1, 2001, will move exclusively to a defined contribution plan. Those employees currently have a cash balance plan, which works like a traditional defined benefit plan but allows participants to collect their benefits in a lump sum at retirement instead of in monthly checks. GM said those employees will continue to earn annual interest on the balance in their plans. Those employees also will get a contribution of 4 percent of their annual pay to their 401(k) program.
"These changes will reduce financial risks and future costs for GM, while protecting current retirees’ and employees’ earned pension benefits and providing competitive and fair retirement benefits going forward," Wagoner said in a statement.
Salaried employees hired on or after Jan. 1, 2001, will move exclusively to a defined contribution plan. Those employees currently have a cash balance plan, which works like a traditional defined benefit plan but allows participants to collect their benefits in a lump sum at retirement instead of in monthly checks. GM said those employees will continue to earn annual interest on the balance in their plans. Those employees also will get a contribution of 4 percent of their annual pay to their 401(k) program.
"These changes will reduce financial risks and future costs for GM, while protecting current retirees’ and employees’ earned pension benefits and providing competitive and fair retirement benefits going forward," Wagoner said in a statement.
Restructuring is a difficult process. The company must decide either to lose a few employees/benefits or lose the company.
Even though I don’t like to admit it, GM may be doing the right thing to save the company.
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