General Electric plans to freeze pension plans for about 20,000 United States employees while offering pension buyouts to 100,000 former employees in a bid to slash debt.
GE says it’s taking steps to reduce its pension deficit by between $5 and 8 billion as part of its strategic priority to improve its financial position.
The industrial conglomerate, which employs some 4,000 people in the Capital Region, has been selling off assets and streamlining operations amid sagging profits and other negative developments in recent years. The Boston-based company faces about $54 billion in industrial net debt. Whittling that down has become a priority for CEO Larry Culp. Speaking in Albany Monday, U.S. Senate Minority Leader Chuck Schumer said it will impact workers in the area. "Look, I think these folks worked long and hard and I'm really disappointed that General Electric is freezing the pensions of 20,000 people across the country. Obviously it'll affect people here. It's sort of breaking, it's breaking a promise."
Reached for comment, GE referred to a prepared statement from chief human resources officer Kevin Cox, who said "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." (more*)
Olivia Mitchell is executive director of the Pension Research Council at the Wharton School of the University of Pennsylvania. "Corporations in the U.S. have tended to offer either defined contribution plans, which are like 401K plans, or defined benefit plans. In fact defined benefit plans used to be the norm in the U.S. though they have been heading towards a long demise. "
GE says the former employees who have not yet begun receiving pension payments and lump-sum option eligible employees are already being contacted, with payouts scheduled to be made in December. "So the numbers are big, obviously, and what it means for the people whose pensions are frozen, is that those employees will no longer accrue any additional benefits based on their future years of service. GE has stated, however, they will put in place a 401k plan for those employees, which will have a 3 percent contribution rate, 3 percent of pay for each worker given by the company. And in addition, there will be a 50 percent match, up to 8 percent. On top of that, GE has said they'll put in another 2 percent for a couple of years as a transition. So I think with this move GE has really conformed to the long-term trend in corporate America, very, very few companies still offer defined benefit plans. Only 16 percent of the Fortune 500 still offer defined benefit plan versus about 60 percent 30 years ago."
Mitchell added that many corporate troubles are rooted in the 2008 recession.
Pensions and benefits have been making headlines in the Capital Region: Former employees of St. Clare's hospital have been fighting to get their pensions restored after the now-defunct facility's retirement fund collapsed. Employees of Good Samaritan Nursing Home and Kenwood Manor in Delmar were recently notified their health care benefits will be terminated in less than 30 days, and they're worried about what will happen to their pensions.
General Electric's largest union — (IUE-CWA Local 301 represents GE Power workers in Schenectady and employees at GE Global Research) did not immediately return calls for comment. The GE freeze is effective January 1st, 2021.