GE Acts to Cut Pension Deficit

General Electric announced on Oct. 7 that it has taken three steps it believes will reduce its pension deficit by approximately $5 billion to $8 billion. GE already has closed its pension plan to new entrants, a step that became effective Jan. 1, 2012.

Here are the steps GE is taking, according to a GE press release:

Freezing the U.S. GE pension plan for approximately 20,000 salaried employees and the U.S. supplementary pension benefits for approximately 700 employees who became executives before 2011. Both changes are effective Jan. 1, 2021.

GE says that the freeze will not affect its retirees who already are collecting pension benefits, nor employees with production benefits.

Pre-funding approximately $4 billion to $5 billion in estimated minimum ERISA funding required for 2021 and 2022. GE says that these funds come from the $38 billion it identified or collected from its BioPharma, BHGE and Wabtec transactions.

Offering lump-sum payments to approximately 100,000 eligible former employees who have not started to receive their monthly GE U.S. pension benefits. GE says that it will send notices to plan participants eligible for this option; GE says that those who opt for a lump sum “should expect to receive it in December 2019.” GE says that it will be making the lump-sum payments from existing plan assets, and not company funds.

GE says that it expects these steps to cut its pension deficit by approximately $5 billion to $8 billion, and to reduce its net debt by $4 billion to $6 billion. It does not expect its plan’s funded status to be harmed by the lump-sum payment offer, and noted that its funded ratio was 80% at the end of 2018.

GE is not alone among major employers to take this step in recent years, notes MarketWatch, which cites DuPont, IBM and UPS as three such companies. Nonetheless, MarketWatch adds, single-employer pensions’ condition is improving according to the Pension Benefit Guaranty Corporation.