Oct. 8--General Electric announced it is freezing its defined pension plan for some 20,000 U.S. employees starting in 2021, while offering a lump-sum buyout in December to about 100,000 former employees who have yet to initiate payments.
No changes are in store for retirees who are already collecting pension benefits, with GE to continue offering 401(k) pension plans that include company contributions. GE has not accepted new entrants to its defined pension plan since 2012.
GE has thousands of former employees and retirees in Connecticut who worked until 2016 in Fairfield, where the company had been based before relocating executives to Boston, and other area offices. GE Capital has its main office in Norwalk, with the company a major employer in the Hartford area after acquiring Alstom's utility grid systems business three years ago.
Under CEO Larry Culp who was hired a year ago to replace John Flannery, GE reported $3.5 billion in profits in the first half of this year, after absorbing a $22.8 billion loss in 2018 the result of bad insurance policies on the books from years ago, a prolonged slump in divisions that provide systems to utilities, and strategic moves by longtime GE CEO Jeff Immelt that Culp is now unwinding. The company is scheduled to release on Oct. 30 its financial results for the third quarter.
"Putting the good and the bad on the table in equal measure is not always easy, but it is critically important," Culp was quoted saying in interview excerpts posted online last week by the company. "Simply put, we have too much debt, and as I promised we are working to reduce it thoughtfully and soon."
GE shares were down slightly Monday morning in line with the broader stock markets, trading at about $8.50 and having entered the year at just above $8 a share.
In a prepared statement Monday, a company executive termed the pension announcement as a "difficult" decision aimed at helping the company pare a shortfall estimated between $5 billion and $8 billion to cover its previously projected pension obligations.
The company announced Monday it would also freeze "supplementary" pension benefits for some 700 U.S. executives beginning in 2021, with those individuals being shifted to a separate executive retirement benefit GE has offered new executives the past eight years.
The conglomerate had hinted at changes in the works for its pension as a major component of its efforts to improve its debt profile, along with a planned inter-company loan repayment to GE Capital.
GE did not make a contribution to the GE Pension Plan in the first half of 2019, according to a July Securities & Exchange Commission filing, after funneling more than $920 million last year. The company reported an "underfunded status" of $18.5 billion for its principal pension plans entering this year, not including nearly $3.9 billion for other retirement plans and $4.8 billion for retiree health and life benefits.
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