Several hundred salaried General Motors' retirees and spouses with ties to the assembly plant in Janesville are facing pension plan changes that one local investment adviser says will be "grueling."
A GM retirement group, however, is even more dramatic in its assessment of the changes, saying the automaker is "throwing its retirees under the bus and renouncing its promises to its most loyal former employees."
Earlier this month, GM said it would offer about 42,000 of its 118,000 U.S. salaried retirees a lump-sum buyout on their pension plans.
GM will buy a group annuity contract from Prudential Insurance, which will pay and administer future benefit payments to the remaining retirees.
The automaker expects to complete the transactions -- expected to reduce its pension obligation by $26 billion -- by the end of the year.
"These actions represent a major step toward our objective of de-risking our pension plans and will further strengthen our balance sheet and give us more financial flexibility going forward," said Dan Ammann, GM's senior vice president and chief financial officer.
The changes do not affect retirees' eligibility for post-retirement health care, life insurance and vehicle discounts.
The changes fall into three categories:
-- Employees who retired between Oct. 1, 1997, and Dec. 1, 2011, can take a one-time, single, lump-sum payment, continue with their current benefit payable by Prudential or sign up for a new monthly benefit paid by Prudential that's based on their marital status.
-- Employees who retired before Oct. 1, 1997, will continue with their current monthly benefit paid by Prudential.
-- Most active, salaried employees and retirees who started getting pension benefits after Dec. 1, 2011, will move into a new GM pension plan with the same benefits.
John Berkley, a local investment adviser and salaried GM retiree, said it is the first group that faces a decision: take the lump sum or not.
"It's a big decision, a grueling decision," he said. "It's creating a lot of concern because it's a change for a group of people who haven't had to make these decisions before."
Berkley is sponsoring two question-and-answer forums to address the changes.
"I'm facing the same decisions," he said.
It's impossible to offer specific advice to retirees, Berkley said. That's because the GM lump sum offers will differ for every employee and will be based on their age, retirement income, marital status and other factors.
"There are advantages to it and disadvantages," he said. "You have to remember that if you take this lump sum, you will become the manager of that money.
"For everyone out there, every situation is different."
Berkley said he expects the forums will be large gatherings of retirees willing to share information.
"Many of these people know this stuff inside and out, and I suspect that all I'll really be doing is passing the mic around," he said.
In a letter to GM Chairman Dan Akerson, the General Motors Retirees Association expressed its "absolute consternation and disgust" with the automaker's decision.
Jim Shepherd, the group's president, said salaried retirees are being offered two choices. In either case, "GM wins and retirees lose," he said.
Taking a lump sum places the retirees' plan assets at risk in the financial marketplace while reducing GM's liabilities and temporarily propping up its balance sheet, he said.
Shepherd said those not eligible for the lump sum offer and all others not offered the choice must accept a third-party annuity and forgo federal protections and any hope for cost-of-living adjustments.
"Never, even in our wildest imagination, could we ever have foreseen that GM would turn around and treat its retirees with such little regard and with such disdain as GM is doing now," he said.
GM is not cutting benefits, Berkley said. Beyond the lump-sum offer, it is only changing the source of future pension payments.
"The annuity can be a good thing and a bad thing," he said. "There is the security question, but if GM were to go back into bankruptcy in five years, people would be pretty happy that their monthly check was not coming from GM.
"The bigger message in all of this is that this is the trend we are seeing in America. It's not just GM, although that's where it is right now. Defined benefit plans are leaving the private sector."
