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- General Electric is freezing the pensions of 20,000 U.S. salaried workers to reduce billions in future pension obligations and trim debt.
- About 700 employees in its supplemental pension program, geared toward executives, will also have their pension benefits frozen.
- The company said the change won’t impact already retired GE workers.
General Electric announced it will freeze the pensions of 20,000 U.S. salaried workers, a measure designed to reduce its pension deficit and trim debt. The move will shave GE’s pension deficit by as much as $8 billion and its net debt by as much as $6 billion.
As part of the pension freeze, the industrial conglomerate said it will freeze supplementary pension benefits for approximately 700 employees who became executives before 2011. Supplemental pension plans are typically designed for higher-ranking employees and offer benefits beyond the typical pension plan.
“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,” said Kevin Cox, chief human resources officer at GE.
As part of such efforts, the company said last month it would spend $5 billion to pay down debt. But the effort to reduce debt could also damage employee morale at a time when CEO H. Lawrence Culp Jr. is trying to turn around the troubled conglomerate.
“The impact on employee engagement/morale of some of these pension measures is unlikely to be positive, but in a situation of ‘corporate battlefield surgery,’ this tends to be a typical, if unfortunate casualty,” noted Barclay’s analyst Julian Mitchell in a Monday research note.
Culp, a turnaround specialist, was paid more than $15.3 million last year, or 345 times the 2018 median GE employee wage of around $43,500, according to Equilar.
What is a pension freeze?
A pension freeze effectively puts a hold on new benefits from accruing to a retirement account, according to the Pension Rights Center. GE said the 20,000 workers affected by the change won’t accrue additional benefits nor make employee contributions after January 1, 2021.
GE said the pension freeze won’t impact GE retirees already collecting pension benefits or employees with production benefits.
Like other corporations, GE has been phasing out its pension amid a push toward self-directed retirement plans such as 401(k)s. GE said it hasn’t allowed new workers into its pension plan since 2012.
“Today’s actions more closely aligns GE benefits with current industry standards and competitive market practices,” the company said Monday in a statement.
Additionally, GE also said it’s offering a lump-sum option to about 100,000 former employees who have not started their monthly pension payments. The company said it’s sending out notices to those eligible employees, and will pay the lump sum in December.