GM pension changes leave retirees’ money unprotected, group says

June 16, 2012
GM pension changes leave retirees’ money unprotected, group says
By MELISSA BURDEN / The Detroit News
The General Motors Retirees Association is protesting GM’s plan to buy out pensions of up to 42,000 U.S. salaried retirees and move other retirees to an annuity program controlled by Prudential Insurance Co. of America.

The association calls GM’s decision “galling” and says it threatens retirees’ financial security. In a letter to GM Chairman and CEO Dan Akerson, signed by association president Jim Shepherd of Scottsdale, Ariz., and posted on its website, the group asks GM to reverse course.

“By eliminating this large class of salaried retirees from the pension plan, you are abandoning the hard-earned benefit of an ERISA-protected pension promised to thousands upon thousands of GM retirees in return for their commitment and loyalty,” the letter reads. “This surpasses basic unfairness; indeed, it is sheer irresponsibility and greed.”

ERISA stands for the Employee Retirement Income Security Act, the 1974 federal law that sets standards for private-industry pension plans.

GM Friday called the plan “good for retirees.”

The automaker announced this month that it would offer lump-sum buyouts to salaried retirees who retired between Oct. 1, 1997, and Dec. 1, 2011, and off-load its U.S. salaried retirees’ pensions to Prudential Insurance Co. of America.

In total, 118,000 U.S. salaried workers will be affected, including 42,000 who have been offered buyouts. Those that don’t take them will have their pensions moved to the annuity Prudential will manage. The moves are expected to trim GM’s pension liability by $26 billion.

The association says retirees lose in both cases, because the plan puts pension assets at risk and leaves retirees without coverage under the Pension Benefit Guaranty Corp., a federal agency that protects pension benefits in private-sector plans. Once GM transfers pension assets to Prudential, the PBGC coverage goes away.

“Ninety-nine percent of the emails that I’m getting agree with the letter,” Shepherd, a retired GM fleet account executive, said in a phone interview Friday.

“The most frequent phrase is ‘GM threw me under the bus.'”

On Friday, Cindy Brinkley, GM’s vice president of global human resources, sent Shepherd a letter via email. In the letter, the automaker said it believes the changes will provide salaried retirees with more choices and greater protection for retirement benefits.

“We believe that these changes are good for retirees … and for the company, which will see its pension obligation reduced significantly,” wrote Brinkley. “Strengthening our balance sheet will allow GM to do something we haven’t done in decades — focus our attention and resources on being the best carmaker we can be. That is good for everyone with a stake in GM’s success.”

Shepherd said of 200 emails he received Thursday and Friday, only one person was happy to be offered a lump sum; the choice between taking a lump sum and continuing with regular pension payments is voluntary.

Shepherd said some are concerned that there is no guarantee of protected funding with Prudential. Many are cautious, given the past collapse of investment banks such as Bear Sterns.

Roman said insurance regulations protect annuities, though coverage varies by the state each retiree lives in. For example, Michigan’s maximum annuity protection is $250,000.

GM praised Prudential’s record in the retirement business. GM noted that Prudential is an investment-grade company, and GM is not. Prudential must use a separate account to make benefit payments to GM retirees. And those assets would not be subject to claims of general creditors should Prudential fail and file for bankruptcy, the automaker said.

If the GM salaried retiree annuity funding were to drop, Prudential would use funding from its general account to continue making annuity payments to GM retirees, adding another safeguard, GM spokesman Dave Roman said.

“The plan will be fully funded when it moves to Prudential,” Roman said.

GM has received some retiree questions through call centers and emails. The company has scheduled more than 75 meetings for retirees across the country, Roman said. He said GM won’t update how many of the 42,000 retirees take the lump sum until after their decisions, which are due on July 20.

GM will spend between $3.5 billion and $4.5 billion cash in the pension deal.

Seniority Lists
Bargaining Committee

Mike Herron
Tim Stannard
Zone at Large – 1st
Danny Taylor
Zone at Large – 2nd
Mark Wilkerson
Joe McClure
Chad Poynor
Steve Roberts
Derek Lewis
Bill Cundiff
Kirk Zebbs
Don Numinen
Jay Minella
Danny Bragg
Chris Hill
Rashad Thomas
Keith Oswald
Chris Brown

1853 Officers

Tim Stannard
Mike Herron
Vice President
Darrell DeJean
Financial Secretary
Mark Wunderlin
Recording Secretary
Peggy Mullins
Trustee (3)
Jay Lowe
Dave Clements
Dave Spare
Sgt. at Arms
David C Spare
Ashley Holloway
E-Board at Large (2)
David Ryder
Steve Roberts

GM Unit Chair
Mike Herron
Leadec Unit Chair
Larry Poole
Ryder Unit Chair
Patrick Linck
AFV Unit Chair
Katherine McGaw
Retiree Chair
Mike Martinez