General Electric (NYSE: GE) has announced that it is freezing the pensions of 20,000 U.S. salaried workers and 700 employees in its supplemental pension program. According to GE, the workers affected by the change won’t accrue additional benefits nor make employee contributions after January 1, 2021. The accounts are still federally insured and employees will still receive whatever amount of money was already accrued.
GE is also offering a lump-sum option to nearly 100,000 former employees who have not yet started their monthly pension payments. Notices to eligible employees will be sent soon, and the company plans to pay the lump sum in December, according to its announcement. The pension freeze won’t impact GE retirees already collecting pension benefits or employees with production benefits.
The company’s aim is to reduce billions in future pension obligations as well as reduce its debt. According to the company, the action will reduce its pension deficit by as much as $8 billion and its net debt by as much as $6 billion. Kevin Cox, chief human resources officer at GE, said in a statement, “Returning GE to a position of strength has required us to make several difficult decisions, and today’s decision to freeze the pension is no exception.” As the end of the second quarter, pension obligations represented $21 billion of the company’s $54 billion in industrial net debt.
GE hasn’t allowed new workers into its pension plan since 2012, as it moves towards self-directed retirement plans such as 401(k)s. Beginning Jan. 1, 2021, the company says it will contribute 3 percent of eligible workers’ salaries to a 401(k) plan and provide a 50 percent matching contribution for up to 8 percent of employee contributions. There have been no details released about what will happen with the supplemental pension plans, typically designed for higher-ranking employees.