Debt-ridden GE abruptly freezes 20,000 employee pensions

A General Electric Co. logo hangs above the entrance to a building where a GE news conference was being held in New York U.S. on Wednesday Oct. 21 2009

The freeze on the U.S. GE Pension plan will impact approximately 20,000 employees nationwide with salaried benefits, including hundreds who work in the Schenectady area, at facilities including the Schenectady manufacturing campus and Global Research in Niskayuna. Meanwhile, companies such as FedEx Corp. have turned to offloading pension liabilities to insurers, including MetLife Inc.

Like other corporations, GE has been phasing out its pension amid a push toward self-directed retirement plans such as 401 (k) s. GE said it hasn't allowed new workers into its pension plan since 2012.

Shares rose 2.6% to $8.79 in premarket trading.

It's the latest cost-cutting move by CEO Larry Culp, who took over the company past year, and is expected to trim $6-8 million in debt. We are committed to helping our employees through this transition, he added. Culp said last month at an industry conference that interest rates could create a US$7-billion headwind for the pension this year. About 700 employees in a supplementary plan will also be affected. A potential ruling will represent Ireland's first decision related to US companies since privacy laws went into effect.

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The pension freeze will begin on January 1, 2021, and is said not to affect GE retirees that are already collection pension benefits through the program. GE will offer a lump-sum payment to 100,000 eligible former employees who haven't started receiving their monthly pension payments.

GE expects to record a non-cash pension settlement charge in the fourth quarter, but did not specify the amount.

"Returning GE to a position of strength has required us to make several hard decisions, and today's decision to freeze the pension is no exception", Chief Human Resources Officer Kevin Cox said in a statement.

As of Friday's close, the company's market cap was just under $75 billion.

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