General Electric pension freeze sign of the times for the American worker
General Electric’s sweeping changes to its pension plan are a sign of the changing retirement landscape for the American worker.
Ticker | Security | Last | Change | Change % |
---|---|---|---|---|
GE | GE AEROSPACE | 180.62 | -3.98 | -2.16% |
”You don't have the cradle to grave companies going to take care of you and all your benefits and your retirement income anymore,” Michael Moore, wealth management advisor at the Cincinnati-based financial planning and wealth services provider Wealthquest, told FOX Business.
GE said on Monday it will freeze pension contributions for 20,000 employees beginning Jan. 1, 2021. In addition, 700 employees who entered the executive ranks before 2011 will have their supplementary pension benefits put on hold.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Here's how GE employees may be impacted
- A GE engineer who makes $150,000 a year and receives a pension benefit of $200 a month for every year of service at that salary level will see this payment frozen
- An employee in their 60s and has been at the company for almost 40 years and is set to receive a pension benefit of $7,700 a month won’t see much of an impact from Monday’s announcement as their time worked cannot be undone
- There is no change for GE retirees already collecting pension benefits or employees with production benefits
- However, it’s a big deal for someone who is in their 40s and planning to work another 15 years – that’s another $3,000 a month that they won’t be receiving in retirement
Moore also thinks the decision could cause younger employees to leave the company, but he is specifically concerned about the executives who will have their supplementary pension benefits taken away.
“Those are the executive band level and hire people, and those are the cream of the crop at GE,” he said. “Those supplementary pension numbers, depending on how much you're making and all the other stuff, could add up to a couple hundred thousand dollars a year in lost benefits at this point. The talent drain is a concern.”
Moore says GE employees, and anyone else planning for retirement should take into account three facets of retirement planning: your income, your expenses and how much your investments can plug the difference if your income's going to drop by feasibly half of what you thought it was going to be.
“I think this should be a general wake up call for people to make sure that they're a lot closer to their planning goals and that they get questions answered obviously selfishly from people like us that have done this for hundreds of employees,” Moore said. “But I think that the people that are already engaged with planners it's going to be pretty easy too. Do it yourselfers are going to probably have a wake-up call and they should probably get some help" he advised.
The changes to the pension plan will help GE reduce its pension deficit by as much as $8 billion and its net debt by up to $6 billion.
“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,” said Kevin Cox, chief human resources officer at General Electric, in a press release.
“We carefully weighed market trends and our strategic priority to improve our financial position with the impact to our employees. We are committed to helping our employees through this transition.”
The decision will have wide-ranging implications for the financial future of General Electric employees, and the employees of other companies and cities and states that have and will have similar cuts to their pension plans, according to Moore.
CLICK HERE TO READ MORE ON FOX BUSINESS