Printed from

GM pension plan funding down in 2014

Posted On: Feb. 5, 2015 12:00 AM CST

GM pension plan funding down in 2014

Hit by lower interest rates that boosted the value of benefit liabilities, as well as the adoption of new mortality tables that assume longer life expectancies for plan participants, the funded levels of General Motors Co.'s U.S. pension plans slipped in 2014.

At year-end 2014 the plans were underfunded by $10.9 billion, with $65.8 billion in assets and $76.7 billion in liabilities for a funded ratio of 85.8%, the automaker reported Wednesday. By contrast, the plans were underfunded in 2013 by $7.3 billion, with $64.2 billion in assets and $71.5 billion in liabilities for a funded ratio of nearly 90%.

Still, the financial impact on pension plan funding levels of lower interest rates and assumption of greater life expectancies for plan participants is much less than it would have been had GM not taken action several years ago to reduce the size of the plans.

For example, at year-end 2011, the U.S. plans had nearly $109 billion in liabilities and about $94 billion in assets. One year later, the plans had $82.1 billion in liabilities and $68.1 billion in assets.

That roughly $27 billion reduction in liabilities that occurred between 2011 and 2012 was the result of twin actions the big Detroit-based automaker took in 2012 to reduce the size of its pension plans.

One of those steps was an offer GM made to 44,000 salaried employees who retired after Oct. 1, 1997, and before Dec. 1, 2011, to convert their monthly annuities to a cash lump-sum payment. In all, GM paid about $3.6 billion to the 13,000 plan participants who accepted the offer.

As the second part of its pension de-risking strategy, GM purchased a group annuity from Prudential Insurance Co. of America for $25.1 billion. The annuity replaced benefits that about 76,000 salaried employees who retired before Oct. 1, 1997, received from GM, as well as retirees who declined the lump-sum conversion offer.