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About 30% of eligible salaried General Motors Co. retirees have accepted the automaker's offer to convert their monthly annuity to a lump sum benefit, GM said Wednesday.
That offer, which GM announced in June, was extended to salaried employees who retired after Oct. 1, 1997, and before Dec. 1, 2011. 44,000 participants were offered the option.
In addition, GM has purchased a group annuity from Prudential Insurance Co. of America in connection with the second part of its pension de-risking strategy.
The Prudential annuity will replace benefits that salaried employees who retired before Oct. 1, 1997, received from GM, as well as retirees who decline the lump sum benefit conversion offer.
Through the Prudential annuity purchase and conversion of annuity payments to lump sums, GM now expects to eliminate $29 billion of pension liabilities from its balance sheet, up from its original estimate of $26 billion.
In connection with the transactions, GM expects to contribute $2.6 billion to its salaried pension plan.
GM is the first to report the percentage of plan participants that have accepted an annuity to lump sum payment offer. Since GM announced its move, about a dozen other employers have disclosed similar offers.
Through such efforts, employers can reduce their exposure to risks such as unpredictable pension plan contributions due to fluctuating interest rates and investment results.
They also can reduce the administrative overhead associated with maintaining a pension plan, as well as cut the premiums they must pay to the Pension Benefit Guaranty Corp. Under legislation Congress passed earlier this year, the premium employers pay the PBGC will rise to $42 per participant in 2013 and $49 in 2014, up from the current $35.
A Michigan engineering company disclosed Friday that it offered to certain former employees who are eligible for but not yet receiving pension benefits the option to receive a lump-sum cash payment or an immediate but reduced annuity.