General Motors said today that it would freeze its defined benefit pension plan for U.S. salaried employees, who instead will receive contributions to a defined contribution plan or 401(k). GM’s latest attempt to shore up its vastly underfunded pension plans will become effective 30 September 2012.
GM’s global pension plans were underfunded by $24.5 billion, an increase from $22.2 billion at the end of 2010, GM reported in its year-end results earlier today. Of that potentially crippling debt, $13.4 billion comes from promises GM made in the U.S. to its salaried workers.
The change will affect GM’s U.S. salaried employees hired prior to 1 January 2001, estimated at 19,000. Those GM white-collar workers will stop accruing fixed retirement benefits on 30 September and begin receiving defined contributions. Salaried employees hired after that date are already covered by a so-called defined contribution plan.
GM’s U.S. defined benefit pension plans earned asset returns of 11.1% in 2011. They ended the year 88% funded, largely unchanged from 89% funded a year ago.
White-collar workers also won’t get automatic salary increases this year, though the automaker will offer bonuses. GM’s white-collar workers haven’t had an automatic pay increase since February 2010.
GM is also considering other initiatives beyond the changes it made to salaried workers’ pension plans to improve the funded status, CFO Dan Ammann said on a phone call with reporters today.
