The transaction was part of GM's pension plan actions previously announced on June 1. About 42,000 of its 118,000 U.S. white-collar retirees were allowed to choose the group annuity plan or a lump-sum of cash if they agree to stop taking monthly benefits.
DETROIT, MI- General Motors Co. and Prudential Insurance Company of America have closed on a deal for the financial services company to purchase a group annuity contract for the automaker’s U.S. pension plan.
Approximately 110,000 U.S. salaried retirees will now receive annuity payments from Prudential, with their first payments beginning in January.
“This is a win-win for our U.S. salaried retirees as well as for our company,” said Dan Ammann, GM senior vice president and chief financial officer, in a statement sent to MLive Autos. “Our retirees were provided increased flexibility and options while maintaining a secure retirement benefit, and the company has improved its overall risk profile and financial flexibility.”
The transaction was part of GM’s pension plan actions previously announced on June 1. About 44,000 of its 118,000 U.S. white-collar retirees were allowed to choose the group annuity plan or a lump-sum of cash if they agree to stop taking monthly benefits.
Thirty percent of eligible U.S. salaried retirees -- about 13,200 people -- accepted GM’s offer to receive a lump sum payment in lieu of ongoing pension benefits, officials announced Wednesday.
Under the terms of the agreement, Prudential has received approximately $25 billion in premium from the General Motors Retirement Program for salaried employees for the purchase of a group annuity contract.
“We are delighted to have completed this landmark pension transfer agreement with General Motors and welcome the GM retirees who will now receive annuity payments from Prudential,” said Christine Marcks, president of Prudential Retirement, in a statement.
General Motors headquarters are shown in Detroit, Thursday, Nov. 18, 2010. (AP Photo)
In its third-quarter earnings, the Detroit-based automaker said through annuitizations and lump sum payments, approximately $29 billion of GM’s U.S. salaried pension liability is expected to be eliminated.
As a result of the buyouts, GM expects to make total cash contributions to its U.S. salaried pension plan of approximately $2.6 billion and will record an approximately $2.9 billion pre-tax charge in the fourth quarter as a special item.
GM originally estimated that it would make a cash contribution of $3.5 billion to $4.5 billion and record a charge of $2.5 billion to $3.5 billion.
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