In a statement , GM said that as previously announced , it would reduce retirement benefits for salaried employees hired before 2001, changing the formula under which those benefits are based. Salaried employees hired after January 1, 2001, will be migrated to a DC plan for future service where they will get a company contribution equal to 4% of their annual base salary.
In addition to these actions, effective January 1, 2007, all eligible US salaried employees who contribute to GM’s 401(k) program will receive a company match of 50% up to 4% of base salary.
By restructuring its pension programs in a way that mimics ongoing DB to DC trends throughout the economy, the ailing carmaker said the changes would cut its year-end 2006 pension liability by about $1.6 billion and result in a pre-tax charge of about $120 million.
Effective January 1, 2007, GM’s white-collar workers hired before 2001 will stop accruing future DB benefits and begin getting a modified benefit based on 1.25% of the average monthly base salary for future years.US executives participating in GM’s supplemental executive retirement plan will have these benefits frozen as of December 31, 2006. The amended plan will be aligned with its revised US salaried-employee pension plan.
“These changes will reduce financial risks and future costs for GM, while protecting current retirees’ and employees’ earned pension benefits and providing competitive and fair retirement benefits,” Chairman and Chief Executive Rick Wagoner said in the statement.