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General Electric to freeze pension plans to cut down debt

General Electric (NYSE: GE) has announced three key strategic decisions related to its US retirement benefits in order to reduce debt and improve its financial position. These actions are expected to reduce the company’s pension deficit by approx. $5-8 billion and net debt by approx. $4-6 billion.

The company has decided to freeze the US GE Pension Plan for around 20,000 employees with salaried benefits and US Supplementary Pension benefits for around 700 employees, who became executives before 2011, effective January 1, 2021.

GE to freeze pension plans to cut down debt
Photo Courtesy: General Electric / Facebook post

There is no change for retirees who are already collecting their pension benefits. GE’s pension plan has been closed to new entrants since 2012. In the fourth quarter of 2019, GE will record a non-cash pension settlement charge but the specific amount has not been disclosed.

Kevin Cox, Chief Human Resources Officer said, “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.” 

Also read: HSBC to cut 10,000 jobs to reduce debt

GE also plans to use part of its proceeds, totaling $38 billion, from the sale of its various businesses to pre-fund around $4-5 billion of funding requirements under the Employee Retirement Income Security Act for 2021 and 2022.

The company is also offering around 100,000 eligible former employees, who have not started their monthly pension plan payments, a limited-time option to receive a lump sum payment.

GE’s shares were down in morning hours on Monday.

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