GMRA slaps GM for latest salary pension actions
Who knew? Finally the General Motors Retiree Association (GMRA) came out swinging on behalf of the 118,000 salaried retirees of General Motors Corporation (NYSE: GM) in a major way for its decision to trash the retirement plan.
Now before you go boo-hoo on me, be apprised of the reasons. First, the end of the retirement program does more than just shift risk from GM onto an insurance company; mainly Prudential for those who do not take the lump sum. It is still a form of double jeopardy.
For example, the present retirement program is protected by the U.S government. However, the moment it is shifted to Prudential or to some other option, that guaranteed protection dies.
Is GM compensating retirees for that level of loss? No. According to GMRA, “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. This surpasses basic unfairness; indeed, it is sheer irresponsibility and greed.”
For the record, salaried retirees are being offered two choices: a lump sum or a movement to Prudential which is a group annuity. According to GMRA, “in either case GM wins and retirees lose. Taking a lump sum places the retirees plan assets at risk in the financial marketplace while reducing GM's liabilities and temporarily props up the company balance sheet.”
Those not eligible for the lump sum offer and all others not offered the choice must accept a third-party annuity and suffer the loss of both the protection of ERISA and the PBGC, as well as GM's commitment to fund the plan, not to mention any hope for a cost-of-living adjustment. Frankly, I never trusted a COLA adjustment.
Yes, the boo-hoo comments will surely come at this one. However, there is a logical reason for the outrage. Fact is, GM has benefitted greatly from the pension plan, as the income statements have shown a positive cash flow. And while GM's action is legal, the GMRA Board maintains it is not morally and ethically right to break the promise to salaried retirees.
And to make matters worse, GM used $2.9 billion in pension assets to make lump sum restructuring severance payments during 2008 - and ended the year with a $12.4 billion deficit ($20 billion by PBGC calculations). That action put plan participants at great risk. Moreover, GM's raid on the pension fund resulted in such a dangerous degree of under-funding that in early 2009 the Executive Director of the PBGC wrote GM management, asking them to desist from reverting plan assets for fear that such action could trigger a plan termination.
GMRA says that GM for many, many decades, was able to attract and retain the best talent pool of engineers and management staff with the ever-present promise and smiling assurance of deferred compensation by way of a federally-insured pension benefit, payable each year upon retirement. With that promise alone, GM benefitted greatly by the hard work from the most loyal employees any corporation could ever expect to have anywhere in the world.