Expects to reduce GE’s pension deficit by
approximately $5-8 billion
- Multiple changes represent sizable step in Company’s
deleveraging plan.
- Expected to reduce GE’s pension deficit by approximately $5-8
billion and net debt by approximately $4-6 billion1; in total,
along with $5 billion debt tender, GE has announced approximately
$9-11 billion in net debt reduction actions in last month.
- GE’s pension plan has been closed to new entrants since 2012;
today’s actions more closely aligns GE benefits with current
industry standards and competitive market practices.
GE (NYSE:GE) announced today that it is taking three actions
related to its U.S. retirement benefits as part of its strategic
priority to improve its financial position:
- Freezing the U.S. GE Pension Plan for approximately 20,000
employees with salaried benefits, and U.S. Supplementary Pension
benefits for approximately 700 employees.
- Pre-funding approximately $4-5 billion of estimated minimum
ERISA funding requirements for 2021 and 2022.
- Offering a limited time lump-sum payment option to ~100,000
eligible former employees who have not started their monthly U.S.
GE Pension Plan payments.
In total, the actions announced today are expected to reduce
GE’s pension deficit by approximately $5-8 billion and Industrial
net debt by approximately $4-6 billion1. The Company is on track in
its deleveraging plan and continues to expect to make significant
progress toward its leverage goal of <2.5X Net Debt to EBITDA by
the end of 2020, inclusive of the impact of the current interest
rate environment. GE will continue to evaluate further options to
reduce leverage and strengthen its balance sheet.
1. U.S. GE Pension Plan &
Supplementary Pension Freeze:
GE will freeze the U.S. GE Pension Plan for approximately 20,000
employees with salaried benefits, and U.S. Supplementary Pension
benefits for approximately 700 employees who became executives
before 2011, effective January 1, 2021. There is no change for GE
retirees already collecting pension benefits or employees with
production benefits. GE will record a non-cash, pre-tax curtailment
charge in the fourth quarter of 2019. GE’s pension plan has been
closed to new entrants since January 1, 2012.
Kevin Cox, chief human resources officer at GE 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. We carefully weighed market trends and our strategic
priority to improve our financial position with the impact to our
employees. We are committed to helping our employees through this
transition.”
Who
What changes
Approximately 20,000 employees with
salaried benefits who participate in the U.S. GE Pension
Plan
Effective January 1, 2021, the U.S. GE
Pension Plan benefits for eligible employees with salaried benefits
will be frozen. Benefits accrued through December 31, 2020 will not
be impacted by this change. Affected participants will not accrue
additional benefits or make employee contributions to the Plan
after this date.
Beginning January 1, 2021, GE will
contribute 3% of eligible compensation to the Company’s 401(k) plan
and will provide matching contributions of 50% on up to 8% of
eligible compensation.
In addition, to aid in the transition, GE
will provide an extra 2% of eligible compensation (up to the IRS
limit) per year for two years.
Approximately 700 executives currently
eligible for U.S. Supplementary Pension benefits
Effective January 1, 2021, U.S.
Supplementary Pension benefits for eligible participants will be
frozen. Benefits accrued through December 31, 2020 will not be
impacted by this change and will remain subject to the plan’s
vesting rules. Affected executives will not accrue additional
benefits after this date.
Beginning January 1, 2021, affected
executives will begin participating in the Executive Retirement
Benefit (ERB), an installment retirement benefit currently offered
to new executives since 2011.
Employees who become executives after
January 1, 2021
For new executives starting in 2021, GE
will provide a new defined contribution plan benefit that restores
contributions limited in the 401(k) plan by the Internal Revenue
Code. This is a common benefit offering as companies shift from
traditional defined benefit plans to defined contribution
plans.
2. Voluntary Pre-Funding
Contribution
GE also announced that it plans to use a portion of the $38
billion cash sources it has identified or collected from its
BioPharma, BHGE, and Wabtec transactions to pre-fund approximately
$4-5 billion of its estimated minimum ERISA funding requirements
for 2021 and 2022.
3. Limited-Time U.S. GE Pension Plan
Lump Sum Payment Option:
GE is offering approximately 100,000 eligible former employees
who have not started their monthly payments under the U.S. GE
Pension Plan a limited-time option to receive their benefit in a
lump sum. Notices will be provided to eligible participants, and
those who elect to receive a lump sum should expect to receive it
in December 2019.
Company funds will not be used to make the lump sum
distributions. All distributions will be made from existing pension
plan assets in the GE Pension Trust. The company does not expect
the plan's funded status to decrease as a result of this offer. At
year-end 2018, the plan's funded ratio was 80 percent (GAAP). After
distribution of the lump sum amounts, the company expects to record
a non-cash pension settlement charge in the fourth quarter of 2019,
which will be determined based on the rate of acceptance.
About GE:
GE (NYSE:GE) drives the world forward by tackling its biggest
challenges. By combining world-class engineering with software and
analytics, GE helps the world work more efficiently, reliably, and
safely. For more than 125 years, GE has invented the future of
industry, and today it leads new paradigms in additive
manufacturing, materials science, and data analytics. GE people are
global, diverse and dedicated, operating with the highest integrity
and passion to fulfill GE’s mission and deliver for our customers.
www.ge.com
Forward–Looking Statements:
This document contains "forward-looking statements" – that is,
statements related to future events that by their nature address
matters that are, to different degrees, uncertain. For details on
the uncertainties that may cause our actual future results to be
materially different than those expressed in our forward-looking
statements, see
http://www.ge.com/investor-relations/disclaimer-caution-concerning-forward-looking-statements
as well as our annual reports on Form 10-K and quarterly reports on
Form 10-Q. We do not undertake to update our forward-looking
statements. This document also includes certain forward-looking
projected financial information that is based on current estimates
and forecasts. Actual results could differ materially.
1 Calculation of net debt tax effects the pension liabilities at
a rate of 21%.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191007005406/en/
GE Investors: Steve Winoker, 617.443.3400
swinoker@ge.com
GE Media: Mary Kate Mullaney, 202.304.6514
Marykate.nevin@ge.com
Megan Newhouse, 646.682.5605 megan.newhouse@ge.com
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