GM’s plan to replace their pensions with an annuity managed by an insurance firm was heavily criticized by a group that represented the salaried retirees of General Motors. In a letter sent to GM CEO Dan Akerson by the General Motors Retirees Association on June 13, the group said that GM’s plan to move the pension plan for white-collar retirees to Prudential Insurance Co. of America will get rid of federal insurance of their pension income.
This letter can be read at the Web site of this organization. Jim Shepherd, the association’s president, said that it should be factored in that retirees would be denied of the financial security that they earned. GM said this month that it will cost $2.5 billion to $3.5 billion to purchase a group annuity contract from Prudential to cover the pension payments of GM’s 118,000 salaried retirees and dependents.
In addition, GM said that it will give a lump-sum buyout option to 42,000 of those retirees. According to the GM Retirees Association, all salaried retirees would not anymore have any coverage from the federal Pension Benefit Guaranty Corp.
These salaried employees are those who obtain the buyout and those who are moved into the annuity. In the letter, Shepherd said that GM is discarding the hard-earned benefit of an ERISA-protected pension pledged to “thousands upon thousands” of GM retirees in exchange for their commitment and loyalty.
According to a GM spokesman, the company got the letter and has gotten in touch with members of the association to talk about their concerns. He said that Pension Benefit Guaranty Corp. won’t be supportive of the pension plan when it is transferred to Prudential in January.
He also said that other protections have been built into the Prudential contract. The insurer has to create a separate fund to hold the pension assets, which won’t be subject to any future claims by Prudential creditors. Generally, the annuities have coverage via the state guarantee funds. Those protections would be different depending on the state.