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  #901  
Old 09-21-2019, 10:46 AM
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CHURCH PLANS

https://www.christianpost.com/news/p...nizations.html
Quote:
Pension crisis could be looming for at least a million retirees of religious organizations

Spoiler:
For Catholic-affiliated organizations alone, about 1 million pensioners are now estimated to be at risk of having reduced or zero pension benefits due to a federal law that exempts religious organizations from providing regulated and guaranteed pensions.

“It’s estimated to be about a million,” Dara Smith, senior attorney for the AARP Foundation, which advocates for older Americans, told The New York Times in a recent interview. And “that one million figure’s estimated to just be Catholic-affiliated organizations,” she added. The number of pensioners affected at other church-affiliated organizations is unknown.

The federal law at issue, the 1974 Employee Retirement Income Security Act, sets minimum standards for most voluntarily established retirement and health plans in the private industry to provide protection for individuals in these plans.

Among other things, it requires plans to provide participants with important information about plan features and funding and gives participants the right to sue for benefits and breaches of fiduciary duty. If a defined benefit plan is terminated, the law also guarantees payment of certain benefits through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation.

The law, however, does not cover plans established or maintained by governmental entities, churches for their employees, or plans which are maintained solely to comply with applicable workers compensation, unemployment or disability laws.

A church plan, the Pension Rights Center explains, can also be broadly defined to cover employees of hospitals, schools, and other nonprofit organizations that are associated with that church. A plan that is maintained by an organization associated with a church that has as its principal function the administration and funding of a pension plan, can be treated as a church plan.

Many retirees of organizations with church-affiliated plans, like Ralph and Rosemarie Bryden of Rhode Island, are now beginning to feel the pain of that lack of protection for employees of religious-affiliated organizations under the law.

The Brydens, along with 2,700 other pensioners who worked for St. Joseph Health Services, are facing reduced or eliminated payments because the Roman Catholic Church allegedly failed to fund their pensions.

“We used to go traveling,” Rosemarie Bryden, 69, told the Times. “Since things started, we stopped with a lot of other frivolous things.”

Unlike the Brydens, some retirees who feel cheated by “church plans” are now fighting back.

Earlier this summer, NJ.com reported that more than 100 retirees of the now defunct St. James Hospital of Newark, filed a lawsuit against the Newark Archdiocese, alleging that they lost their pensions because the archdiocese mismanaged the fund.

The retirees were promised pensions but alleged the archdiocese intentionally underfunded and removed assets from the plan, causing it to go broke.

Some longtime former workers for the Catholic Hospital explained that they stopped receiving their pension checks in 2017 while others who should have started receiving payments never got any.

“I feel personally abandoned,” Sharon Holutiak, 66, who would have received a monthly pension, told NJ.com. “The Archdiocese of Newark should have the willingness to be up front and center, to unequivocally address the issues of underfunding, misplaced funding or even ignoring that they did indeed provide for a pension and handle it themselves.”

The diocese has argued that it is shielded by ERISA as well as its funding requirements.

The former St. James Hospital workers are hoping they can get justice by alleging breach of contract, breach of fiduciary duty and promissory estoppel — a legal principle that says a promise is enforceable by law when the promisee suffered a detriment, and the promise is one that could be reasonably relied on, NJ.com reported.

“The archdiocese not only breached its moral obligations to its former employees, but also its legal obligations as a contracting party and a fiduciary under New Jersey law,” said the lawsuit.

Nearly 60 percent of pastors do not receive retirement or healthcare benefits from their churches.


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  #902  
Old 09-21-2019, 10:50 AM
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THE NETHERLANDS

https://www.reuters.com/article/neth...-idUSL5N26731E
Quote:
Coverage ratio at big Dutch pension funds falls below 90%, cuts loom

Spoiler:
AMSTERDAM, Sept 16 (Reuters) - Several Dutch pension funds, including the biggest, ABP, which oversees 464 billion euros in assets, reported on Monday their coverage ratio fell below 90% for the first time in August, meaning pensions will be cut for millions of retirees in 2020 unless there is a rule change.

Pensions funds and insurers around the globe saw their solvency slide in August. The Dutch private pension system, one of the world’s largest, was shocked by the slide of government bonds yields into negative rates 20 years in the future.

A large share of pension premiums are now being invested at negative rates, locking in losses on day one.

“The situation became even worse because the European Central Bank pushed rates down further” on Sept. 12, said Peter Borgdorff, director of the health workers pension fund PFZW, which has 225 billion euros in assets under management and reported a coverage ratio of 89.8% on Monday

“We must operate as if we can’t earn anything on investments with your pension funds for decades,” Borgdorff said in a note on Friday. “The situation is not sustainable.”

Pensions are quickly becoming one of the most explosive issues facing Prime Minister Mark Rutte’s Cabinet, as most retirees have not seen a cost-of-living increase on pension payouts since the financial crisis of 2008.

Meanwhile, inflation has been rising and was running at 2.8% in August from a year earlier.

“We oppose cuts that we think are not necessary,” said spokesman Harrie Lindelauff of the FNV Union, the country’s largest.

“We have called on the Cabinet to prevent it from happening, as it is impossible to explain to our members, given the good returns made by pension funds over the past decade.”

Under current Dutch rules, if funds’ coverage ratio is below 95 percent at the end of 2019, they must cut payouts.

In a debate with Parliament on Sept. 6, lawmakers called on Social Affairs Minister Wouter Koolmees to stop using market rates to forecast asset growth.

“In simple terms, against those large assets, and yes they are big — around 1.5 trillion euros — there are even greater obligations, more promises to participants,” he said, arguing market rates should be used to measure both funds assets and liabilities.

“That’s why the coverage ratio is less than 100 percent, and that’s the reality.”

A spokesman for Social Affairs Ministry said Koolmees is in talks with funds to see “what the possibilities are”. (Reporting by Toby Sterling, editing by Ed Osmond)


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Old 10-03-2019, 12:14 PM
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https://www.npr.org/2019/10/03/76351...olic-hospitals

Quote:
'Why Is There Nothing Left?' Pension Funds Failing At Catholic Hospitals

Spoiler:
For 24 years, Karen Bradley worked as a nurse at St. Clare's Hospital in Schenectady, N.Y. The pay wasn't great, she says, but it was a good hospital, the place where her father once worked as a pharmacist. Bradley thought that if she stayed she'd have a nice pension for retirement.

"I enjoyed what I did there and believed in the promises that were made about the pension," she says.

But a year ago, Bradley got a letter saying her pension was gone.

"Why is there nothing left? Who screwed up?" she wondered.

Bradley, 56, is one of the hundreds of workers at St. Clare's, which was founded by the Catholic Church, who lost their pensions after its retirement fund collapsed.

Church Workers' Pensions Lack Safeguards
ECONOMY
Church Workers' Pensions Lack Safeguards
The case highlights a more widespread problem: Because of a loophole, many religious organizations are not covered by a federal guarantee that protects most other workers' pensions, so the workers can get left with nothing.

By one estimate, more than 1 million workers and retirees from religious organizations lack this federal protection.

St. Clare's ran into financial problems, and in 2008 it was folded into a larger hospital system. Workers like Bradley say they were told not to worry — the pension fund would still be there for them. But for Bradley and others, it won't be there.

"Who did what to who and how come this happened and who's accountable?" Bradley asks.

The AARP Foundation wants people to be held accountable too. It filed a lawsuit against the Roman Catholic Diocese of Albany and the pension fund's board of trustees. The suit says that more than 600 workers lost their entire pensions like Bradley did. A smaller group of older workers was offered reduced pensions.

Bradley says her husband has some retirement savings, but they're not sure it will be enough. "You know, we have a daughter who has special needs, so we have to worry about her future too," she says.

Most Americans don't have pensions. But the vast majority of those who do are protected by a government insurance program just in case this kind of thing happens. Employers with pensions have to pay into it.

MIT To Settle Suit Alleging It Hurt Workers In 401(k) Plan
BUSINESS
MIT To Settle Suit Alleging It Hurt Workers In 401(k) Plan
But religious organizations, such as Catholic hospitals, can opt out and avoid the expense of paying that insurance and complying with other federal rules aimed at making sure pensions are adequately funded and insured.

That's what the people managing St. Clare's Hospital did. So there is no guarantee, and many of its workers really are left with nothing.

"It's incredibly devastating," says Dara Smith, an attorney with the AARP Foundation. "These folks were relying on this money for their retirements. For some of them, it was all of the money that they were expecting for their retirement, and they were promised it over and over."

Smith says a 2017 Supreme Court decision made it easier for religious groups to opt out. The legal team that argued that case estimated that about 1 million people have pensions from religious organizations that have opted out of the federal guarantee program. Smith says it's hard to know how many of those are on shaky ground. Some "church plans" get their own insurance.

Retired Coal Miners At Risk Of Losing Promised Health Coverage And Pensions
SHOTS - HEALTH NEWS
Retired Coal Miners At Risk Of Losing Promised Health Coverage And Pensions
But there are a growing number of lawsuits over troubled pension funds with no government guarantee. Smith cites cases in Rhode Island, New Jersey, Minnesota and Puerto Rico.

The AARP Foundation's lawsuit argues that while St. Clare's had an exemption from the federal requirements to pay into the guarantee program, it still violated state law by failing to provide pensions it promised to its workers.

Smith says religious groups that chose to opt out can't just abandon their workers when pension funds get in trouble. "This is really a new wave of lawsuits finding a way to make sure that they can be held accountable," she says.


"You know, you get through it. But it does take its toll on your heart and soul," says Mary Hartshorne, one of the plaintiffs in a lawsuit over the failed St. Clare's Hospital pension plan.
Craig Miller for NPR
Mary Hartshorne, 69, one of the plaintiffs in the St. Clare's suit, had to sell her house because of the pension debacle. She still can't talk about it without getting upset.

"That house was going to be the place I retired," Hartshorne says as tears fill her eyes and her voice quavers. "It was just a little house, but it sat on a little lake and it was so pretty and peaceful."

But with the financial hit, she decided she couldn't afford the mortgage and upkeep.

"It just wasn't ... going to work out. I knew it wasn't, and I thought all I can do is pray and make the right decision," she says. Hartshorne says she has tried to accept it. "You know, you get through it. But it does take its toll on your heart and soul."

Hartshorne says she's better off than most. Because she's older, she's in a smaller class of workers over age 62 who were offered 70% of their pension going forward. But she says she couldn't trust that the money would be there, so she took a lump sum payout instead. But she says it wasn't much money.

The Diocese of Albany declined to be interviewed because of the litigation. It said in a statement that it knows people are suffering but that the diocese "never managed the St. Clare's pension fund. St. Clare's is a separate corporation."


Victoria Esposito, a legal aid attorney working with the AARP on the St. Clare's case, says the Roman Catholic Diocese of Albany "is responsible for making these people whole and paying their pensions."
Craig Miller for NPR
Victoria Esposito, a local legal aid attorney working with AARP on the case, says the diocese does bear a responsibility. "This hospital was run by the Catholic Church, more specifically the Diocese of Albany, and the Diocese of Albany is responsible for making these people whole and paying their pensions," she says.

Like many dioceses, Albany's is facing costs related to the Catholic Church sex abuse scandal. But the lawyers for the hospital workers say the diocese isn't bankrupt and still has money. So Esposito says she hopes that the lawsuit can succeed and that the hundreds of former workers can get their pensions back.
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  #904  
Old 10-03-2019, 02:50 PM
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https://www.ai-cio.com/news/uk-pensi...paign=CIOAlert

Quote:
UK Pension Lifeboat to Protect Thomas Cook Pension
Plan participants will likely see reduced benefits after the 178-year-old travel firm collapse

Spoiler:
When British travel company Thomas Cook collapsed last week after 178 years in business, it left not only thousands of travelers’ in limbo, but it did the same for thousands of employees who are members of the company’s pension.

The Pension Protection Fund (PPF), the UK’s safety net for defunct companies, said it would step in to help protect the pensions of participants in Thomas Cook’s defined benefit plans.

“We understand this is a very difficult time,” said the PPF in a statement, “but if you’re a member of a Thomas Cook defined benefit pension scheme you can be assured that your pension is protected by us.”

The company said the plan is now expected to move into the PPF’s assessment process. The assessment process, which can take as long as two years, will review the plan’s assets and expected liabilities to determine what level of pension benefits the plan will be able to pay in future.

During this time, the trustees will retain overall responsibility for running the plan, while members’ benefits will be paid in accordance with PPF compensation levels. At the end of the process, the plan will either transfer into the PPF, which would become responsible for paying benefits to all members, or the plan may be able to secure benefits at or in excess of PPF levels through an insurer if the plan’s funding levels are determined to be sufficient.

In a letter to members of the company’s pension plan, Thomas Cook said the liquidation of the company will lead to several changes to the governance and functioning of the pension plan.

“The plan is reasonably well-funded and we hope to be able to pay benefits in excess of the levels guaranteed by the PPF,” said Thomas Cook. “But we cannot be sure until the process is concluded.”

The company said that benefits secured prior to Sept. 23 will continue to be paid during the assessment period as normal, although the benefits will be in line with PPF compensation levels. Retired members over their normal pension age, or members who retired on the grounds of ill health, will continue to receive their pension in payment in full, however, possibly with lower levels of future pension increases.

Meanwhile members receiving pensions who had not reached their normal pension age as of Sept. 23, including members who retired early, will have their pension adjusted to 90% of the pension in payment prior to Sept 23. Members who retire during the assessment period will receive their full pension if they reached their normal pension age before Sept. 23, otherwise members who were below their normal pension age at that date generally receive 90% of their entitlement.

Thomas Cook also reassured its pensioners that the assets of the plan are separate from the Thomas Cook Group, and therefore the insolvency practitioners have no access to it. However, the company said the planned merger of the various pension plans it sponsors will no longer be in place, and each plan will go through the PPF assessment period individually.


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Old 10-07-2019, 04:41 PM
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GE

https://www.marketwatch.com/story/ge...EQdgSeKhSEiDUQ
Quote:
GE freezing pensions for 20,000 employees
GE to record charge as it offers lump-sum payment option to 100,000 former employees; stock erases early losses to trade higher


Spoiler:
General Electric Co. said Monday it is freezing pensions for about 20,000 U.S. employees with salaried benefits, as part of its plan to reduce its pension deficit by up to $8 billion.

The stock GE, -0.12% slipped 0.1% in afternoon trading, amid a seesaw session in which the stock was down as much as 1.1% and up as much as 0.9%.

GE said it was also freezing supplementary pension benefits for about 700 employees and offering a limited-time lump-sum payment option to about 100,000 former employees who have not yet started their monthly pension payments.

The company said there is no change for GE retirees already collecting pension benefits or employees with production benefits. GE’s pension plan has been closed to new entrants since 2012.

Effective Jan. 1, 2021, affected employees won’t accrue additional benefits or make employee contributions to the pension plan. Starting the same date, GE said it will contribute 3% of eligible compensation to employee 401(k) plans and provide matching contributions of 50% on up to 8% of eligible compensation.

Time
General Electric Co.
Dec 18
Feb 19
Apr 19
Jun 19
Aug 19
Oct 19
US:GE$6$8$10$12$14
In addition to reducing the pension benefit by $5 billion to $8 billion, GE said it expects to reduce net debt by $4 billion to $6 billion.

The company said it would use a portion of the $38 billion in cash it has identified or collected from assets sales to fund the pension moves, which includes pre-funding an estimated $4 billion to $5 billion of its requirements under the Employee Retirement Income Security Act (ERISA) for 2021 and 2022.

“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,” said Chief Human Resources Officer Kevin Cox. “We carefully weighed market trends and our strategic priority to improve our financial position with the impact to our employees.”

The pension plan moves comes amid questions about the financial health of the conglomerate amid continues struggles within its power business and as the company looks to reduce its debt burden.

Don’t miss: As Larry Culp tries to turn around GE, this is the next phase to watch

Also read: GE is the new target of Madoff whistleblower.

GE said the former employees who elect to take a lump-sum payment should expect to receive the money in December. The company said it will fund the lump-sum payments from existing assets in the GE Pension Trust, which was funded at 80% as of the end of 2018. GE expects to record a yet-to-be-determined fourth-quarter charge because of this.

CFRA analyst Jim Corridore kept his buy rating on GE’s stock, saying he remains the plan shows that GE was moving in the right direction.

“We think this is a prudent move to help GE cut debt and act on its pension deficit, which should add to recent actions to cut debt and shore up the balance sheet,” Corridore wrote in an emailed note to clients. “This move shows that GE is looking to pull any and all levers to restore financial health.”

The company assumed an expected return of 6.75% for the GE Pension Plan and the GE Supplementary Pension Plan this year, according to its latest annual report, unchanged from 2018. That is less than the median expected return of 7.25% for the largest public pension plans, according to the 2019 NASRA Public Fund Survey. The two pension plans assume a discount rate of 4.34% for 2019 “reflecting current long-term interest rates,” up from 3.64% in 2018. However, interest rates have fallen this year, and a lower discount rate means a larger funding gap, all other things being equal.

GE’s stock has climbed 17.7% year to date, but has still lost 32.4% over the past 12 months. In comparison, the Dow Jones Industrial Average DJIA, -0.36% has advanced 13.7% this year and gained 0.3% over the past year.
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  #906  
Old 10-08-2019, 09:58 AM
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GE

https://www.genewsroom.com/press-rel...n-plan-actions
Quote:
GE Announces U.S. Pension Plan Actions
Oct 07, 2019
Expects to reduce GE’s pension deficit by approximately $5-8 billion

Imagination at work

GE Announces U.S. Pension Plan Actions
Oct 07, 2019
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 billion*; 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.
Spoiler:
October 7, 2019, BOSTON -- 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:

1. 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.

2. Pre-funding approximately $4-5 billion of estimated minimum ERISA funding requirements for 2021 and 2022.

3. 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 billion*. 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.”

Freeze

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...ing-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.

*Calculation of net debt tax effects the pension liabilities at a rate of 21%.


https://www.reuters.com/article/us-g...edName=newsOne
Quote:
GE to freeze, pre-pay pensions to save up to $8 billion, cut debt

Spoiler:
(Reuters) - General Electric Co said on Monday it would freeze pensions for about 20,000 salaried U.S. employees and take other related moves to help the ailing conglomerate cut debt and reduce its retirement fund deficit by up to $8 billion.

FILE PHOTO: The General Electric Co. logo is seen on the company's corporate headquarters building in Boston, Massachusetts, U.S. July 23, 2019. Picture taken July 23, 2019. REUTERS/Alwyn Scott/File Photo
Analysts said the move would largely offset the rise in GE’s pension obligations due to lower interest rates and was in line with other steps Chief Executive Officer Larry Culp has taken over the past year to raise cash and pare down $105.8 billion in debt.

Culp has slashed GE’s quarterly dividend to a penny and has sold - or announced plans to sell - non-core businesses, slimming the once-sprawling company to focus just on power plants, jet engines and windmills, plus related equipment and services.

GE’s pension plans are among its biggest liabilities and were underfunded by about $27 billion at the end of 2018. U.S. employees facing the pension freeze will be moved to a defined-contribution retirement plan, such as a 401(k) plan, in 2021.

The company has struggled to boost profits amid a slump in demand for its gas-fired turbines for power generation. It also faces potential costs of more than $1 billion in its jet engine unit from the grounding of Boeing Co’s 737 MAX airliner.

GE also is likely to set aside about $11 billion to cover liabilities for its long-term care insurance business.

By freezing the U.S. pensions, pre-paying about $4.5 billion in contributions due in 2021 and 2022 and offering lump sums to about 100,000 retirees, GE said it expects to cut pension underfunding by $5 billion to $8 billion.

William Blair & Co. analyst Nicholas Heymann said there was no immediate net reduction in GE’s pension liabilities given the 90 basis-point decline in long-term interest rates since the end of last year, which has caused its pension liabilities to creep up to about $34 billion from $27 billion toward the end of 2018.

“The impact is being offset now, rather being reduced. So it is possible that investors are not cheering,” Heymann told Reuters. He added, though, that Culp “is setting up (GE for) much better performance next year.”

GE’s shares were down 0.2% at $8.55 in afternoon trading, after rising 2.6% to $8.79 in premarket trading.

The pension freeze takes effect Jan. 1, 2021.

The moves also are expected to help lower GE’s net debt by $4 billion to $6 billion, the Boston-based company said, adding that there would be no change for retirees already collecting pension benefits.

GE’s industrial net debt stood at $54.4 billion as of June 30.

“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,” GE Chief Human Resources Officer Kevin Cox said in a press release.

GE’s pension plan has been closed to new entrants since 2012. The company had about 283,000 employees at the end of 2018, about 97,000 of them in the United States.

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

The company also said it would pre-fund about $4 billion to $5 billion of its requirements for 2021 and 2022 under the Employee Retirement Income Security Act by using a portion of the $38 billion in cash it is collecting from the sale of various businesses.

GE said it was on track to hit its target of less than 2.5 times net-debt-to-earnings before interest, tax, depreciation and amortization, or EBITDA, by the end of 2020.


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Old 10-08-2019, 02:34 PM
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GE

https://burypensions.wordpress.com/2...reeze-warning/

Quote:
GE Freeze Warning

Spoiler:
With a Defined Benefit plan that is over 100% funded why did General Electric (GE) announce that it was:

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?
Part of the answer is in the SB Actuarial Certification forms for the last 10 years which show:






Having made very little, if anything, in company contributions through 2016 GE decided to go all out in 2017 with a contribution that was supposed to fully fund the plan but the same problem persisted.

With 422,409 participants as of 12/31/18 the premium GE has to pay to the Pension Benefit Guaranty Corporation (PBGC) in the next week will likely be $262,315,989. Even a plan that is overfunded for valuation purposes is considered underfunded in the view of the PBGC which requires the use of much lower segment rates to determine the liabilities upon which the premiums they get are calculated. To cope with this tax GE adopted this three-pronged approach:

Freeze benefits to lower liability values.
Pre-fund to raise asset values.
Offer lump-sum payment option to ~100,000 eligible former employees to lower the participant count.
GE sponsors the 15th largest private-sector defined benefit plan in terms of participants. Many others have followed this path paved by the PBGC and many more will.

From the latest 5500 filing:

Plan Name: GE Pension Plan
EIN/PN: 14-0689340/333
Total participants @ 12/31/18: 422,409 including:
Retirees: 242,357
Separated but entitled to benefits: 137,498
Still working: 42,554

Asset Value (Market) @ 1/1/18: $56,155,554,957
Value of liabilities using RPA estimated rate (5.72%) @ 1/1/18: $51,334,973,543 including:
Retirees: $31,415,054,011
Separated but entitled to benefits: $10,074,794,756
Still working: $9,845,124,776

Funded ratio: 109.39%
Unfunded Liabilities as of 1/1/18: N/A

Asset Value (Market) as of 12/31/18: $50,008,634,994
Contributions – Employer: $0
Contributions – Employee: $89,856,902
Payouts: $3,445,861,777
Expenses: $252,570,116



https://www.wsj.com/articles/ge-unve...ad-11570447318
Quote:
GE to Freeze Pensions for 20,000 Workers
Conglomerate says moves will reduce pension deficit by up to $8 billion; it will add $5 billion to pension fund next year

Spoiler:
General Electric Co. said it was freezing its pension plan for about 20,000 U.S. workers and offering pension buyouts to 100,000 former employees, as the conglomerate joins the ranks of U.S. companies phasing out a guaranteed retirement.

GE is one of the rare big U.S. manufacturers that still allows salaried workers to accrue traditional pension payments, though it closed its plan to new participants in 2012. The company's profits have evaporated in recent years, prompting GE to slash its dividend and Chief Executive Larry Culp to look for ways to pare its debts.

GE's traditional pension and post-employment benefits programs, which were underfunded by $27 billion as of the end of 2018, are one of the company's biggest liabilities. The company said the latest changes could reduce its pension deficit by as much as $8 billion.

GE is still responsible for lifetime payments to more than 600,000 retirees, workers and beneficiaries. The latest changes won't affect retirees or others already receiving pension payments.

The company's pension plan is the second largest by projected obligations, only behind International Business Machines Corp.'s, according to consulting firm Milliman Inc., which compiles data on the 100 U.S. public companies with the largest pension plans.

GE had funded 76% of its projected pension obligations at the end of 2018, according to Milliman, compared with 91% funded at IBM. The median funding level was 89% for the group of companies.

Freezing pension plans has become a common technique to reduce risks and shrink corporate balance sheets, said Zorast Wadia, a consulting actuary at Milliman. "You are stopping the bleeding," Mr. Wadia said. Freezing the plan, however, doesn't address GE's existing funding shortfall.

The company said it would contribute up to $5 billion in cash to the pension plan next year to meet funding requirements. It contributed $6 billion to shore up the plan last year.

On Monday, GE said 20,000 U.S. employees will no longer accrue new benefits under the pension plan as of the beginning of 2021. The employees can take the benefits they have accumulated through the end of 2020 once they retire, but they won't receive credit for additional years of work. They will join GE's existing 401(k) retirement-savings plan and will get an extra 2% of their salary for two years.

The freeze also applies to about 700 employees who became executives before 2012 and had a supplementary pension. The change doesn't affect union workers, the company said, or nonunion production workers. GE will record a noncash charge on the move in the fourth quarter.

For decades, a job at GE with its generous pension was a safe ticket to a middle-class life for many Americans. The 300,000-person company shifted work overseas and restructured its operations, but GE has been slower than some U.S. firms to pare back that safety net.

Thousands of U.S. companies have swapped traditional pensions for 401(k) plans, effectively shifting the risk of volatility to their workers and reducing long-term costs. IBM closed its pension plan to new hires in 2005 and froze benefits in 2008. Boeing Co. closed its pension in 2009 and froze benefits in 2016.

In 2017, only 16 companies in the Fortune 500 offered traditional defined-benefit plans to new hires, down from 238 in 1998, according to the consulting firm Willis Towers Watson. By 2017, 42% of Fortune 500 companies with defined-benefit plans had frozen them in some way.

Mr. Culp has made paying down debt one of his priorities since abruptly becoming GE's CEO a year ago. He has called 2019 a reset year for GE. The company recently gave up control of oil-services firm Baker Hughes, triggering a charge likely exceeding $8 billion in the third quarter.

GE's main pension plan covered about 243,000 retirees and beneficiaries, 144,500 vested former employees and approximately 43,000 active employees as of the end of 2018. GE also is responsible for other pension plans that are the legacies of acquisitions that cover another 180,000 people.

GE said Monday it will offer lump-sum payments to about 100,000 former employees who haven't started collecting monthly pension payments. Those payments will come from existing pension plan assets.

The company said the changes would cut its pension deficit by up to $8 billion and its net debt by up to $6 billion.


https://www.ai-cio.com/news/new-gene...paign=CIOAlert
Quote:
New General Electric CIO Freezes Pension Fund
The new chief investment officer has been overseeing the underfunded plan for two weeks.

Spoiler:
Less than a month on the job and it seems General Electric Chief Investment Officer Harshal Chaudhari is revamping the blue-chip company’s nearly $70 billion pension fund. On Monday, General Electric announced that it is freezing the plan for approximately 20,000 employees with salaried benefits and supplementary benefits for approximately 700 employees.

The pension fund will have $4 to $5 billion in pre-funding for 2021 and 2022 from the $38 billion in cash the company is generating from asset sales.

The change takes effect on January 1, 2021. That is also when GE will begin contributing 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. The company is offering a limited time lump-sum payment to about 100,000 eligible former employees who have not started their monthly pension plan payments. GE’s pension plan has been closed to new entrants since 2012.

GE’s DB plans totaled $69.4 billion in fair market value as of year-end 2018, which equals 75% funded, according to the company’s financial filing. Overall, the company contributed $6.3 billion last year to boost the pension program, up from $2.9 billion the previous year.

Chaudhari advocated liability-driven investing at IBM. That is how he hedged the portfolio’s risks and enhanced its return-seeking abilities. He overhauled the fixed-income fund to lessen reliance on traditional corporate credit.

The goal is to reduce its pension deficit by about $5 billion to $8 billion, with net debt being about $4 billion to $6 billion. Total pension and retiree benefit plan liabilities were $27.1 million in the second quarter of 2019 and 2018. Principal pension plans cost were nearly $1.7 million in the first six months of 2019 compared to $2 million for the same period in 2018.

GE has been caught in a bit of a whirlwind in recent months. Bernie Madoff whistleblower Harry Markopolos, an accounting expert, released a report In August that claimed the company inflated its cash reserves in inaccurate and fraudulent financial filings. The company said the allegations had no merit.

More bad news followed. GE Aviation suffered a black eye when it became ensnared in the grounding of the Boeing 737 MAX jet that used engines made by a joint GE venture. JP Morgan analyst Stephen Tusa said on Friday that GE Aviation, a bright spot in the GE repertoire, has been lackluster. In a 92-page-report, he wrote that investor expectations for future operating performance are “too generous when measuring value.” The company, a top supplier of Boeing, said in July that the grounding could suck as much as $1.4 billion from cash flow this year.

In the second quarter, consolidated revenue was down 1% from $29.2 billion in 2018 to $28.8 billion in 2019, with industrial-segment revenues down from $27.2 billion in 2018 to $27.1 billion in 2018. GE Industrial revenues were down from $27.1 billion in 2018 to $26.8 billion in 2019. The company had an increase in cash of $2.2 billion and $1.4 billion in the first six months of 2019 and 2018, respectively. The rise in liquidity was due to lower net income and high cash used for working capital and employee benefit liabilities compared to the previous year.

CEO Larry Culp said at a Morgan Stanley investor conference in September that he expects asset sales to bring in about $38 billion in cash as it pares down its debt load. Culp, who took the reins of the company in 2018, said that falling interest rates will increase GE’s pension benefits obligation by about $7 billion net of investment returns. Insurance reserve funding obligation will increase by less than $1.5 billion. Neither of the adjustments will require a cash contribution.

GE is unloading a variety of units. In February, the company deleveraged its $121 billion debt load by selling part of its biotech business to Danaher Corp. for $21.4 billion. The transaction is expected to close in the fourth quarter. GE also sold its transportation business and airplane-finance operation. GE also gave up its majority holding in Baker Hughes, receiving net proceeds of about $2.7 billion. The sale will trigger a write-down of more than $7 billion.


https://www.commondreams.org/news/20...0000-employees
Quote:
Workers Stuck 'Paying the Ultimate Price' as GE Freezes Pensions for 20,000 Employees
"GE hired a new CEO last year with a pay package worth up to $300 million."
Spoiler:
Workers are stuck "paying the ultimate price for executives' poorly-timed deals," said Our Revolution on Monday after General Electric announced it was freezing the pensions of roughly 20,000 employees with salaried benefits.

The company is also offering a lump sum payout option to approximately 100,000 workers who've not yet begun taking pension payments, GE said in its Monday statement.

The changes become effective January 1, 2021. At that point, affected workers will neither accrue additional benefits nor be able to contribute to the plan.

"Returning GE to a position of strength has required us to make several difficult decisions," said GE's chief human resources officer Kevin Cox, "and today's decision to freeze the pension is no exception."

The actions, as CNN Business reported, were made "to help clean up the company's beleaguered balance sheet." Yet, as progressive observer Miles Grant, they contrast greatly with the sweet deals the company gives its CEOs.


The AARP has previously cautioned against lump sum options, warning they represent a bad financial move for individuals.

GE closed its pension to new entrants in 2012, adding to a trend of companies shifting away from traditional pensions. It's a shift progressive observers say bolsters the case for expanding Social Security.
https://www.news10.com/news/local-ne...20k-employees/
Quote:
GE pension freeze to impact 20K employees
Spoiler:
SCHENECTADY, N.Y. (NEWS10) — Struggling General Electric said it has come up with a plan to tackle crippling debt that’s caused uncertainty and several rounds of recent layoffs.

The plan is a pension freeze that would affect 20,000 employees.

The announcement is General Electric’s response to years of shriveling profits and an effort to shave away an expanding debt load.

A company spokesperson tells NEWS10 ABC: “The pension freeze would affect about 20,000 non-union salaried U.S. employees.”

GE says current retirees are not going to be affected.

Under the freeze, covered employees stop earning more pension benefits moving forward such as increases based on salary and years of employment.

Similar problems with pensions have been seen in the Capital Region. The most notable case is with St. Clare’s Hospital when retirees were told that earlier projections of the fund were miscalculated and it was drastically underfunded.

“Now you really, I don’t want to say fend for yourself, but you pretty darn near need to fend for yourself,” financial advisor Hugh Johnson said.

Johnson suggests we think of retirement benefits as a three-legged stool being a pension if you have one, social security and personal investments like a 401k or an IRA.

“I urge everybody to start young to contribute to the plan whether it’s an IRA or 401K or just simply a savings plan,” Johnson said.

GE’s pension plan has been closed to new entrants since 2012 joining other major companies which are moving away from guaranteed retirement plans.

“So, the point is, you got to fend for yourself,” Johnson said. “Build your own IRA or 401K plan and, you know, hope for the best.”

GE said they are offering buyouts to 100,000 former employees who have not started yet begun their monthly pension payments.

The freeze goes into effect Jan. 1st 2021.


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Old 10-08-2019, 06:32 PM
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https://www.usatoday.com/story/money...ad/3898630002/
Quote:
4 reasons the corporate pension is on its deathbed

Spoiler:
General Electric's move to significantly lower its pension liabilities is simply the latest in a sweeping corporate pivot away from guaranteed retirement benefits.

GE on Monday announced that it would offer lump-sum pension buyouts to about 100,000 former U.S. employees who have not yet begun receiving their pensions.

The company, which has been facing pressure to bolster its finances, also announced plans to freeze pension benefits for about 20,700 salaried pensioners at current levels.

Taken together, the moves illustrate how corporate America has largely ditched pensions, which are swiftly becoming a thing of the past for active employees who don't work for the government.

General Electric is offering pension buyouts.
General Electric is offering pension buyouts. (Photo: LOIC VENANCE, AFP/Getty Images)

"In the bigger picture, GE is just going the way that most of the private sector in the United States has gone," said Alicia Munnell, director of the Center for Retirement Research at Boston College. "It’s really over in the private sector. The question is just when does the last plan close down?"

GE freezes pensions: General Electric offers pension buyouts to reduce debt

Why put off retiring?: 5 reasons to retire as early as you can

The number of pension plans offering defined benefits – which means the payouts are guaranteed – plummeted by about 73% from 1986 to 2016, according to the Department of Labor's Employee Benefits Security Administration.

Here are four key reasons why:


1. Pensions are seen as expensive, risky
Defined-benefit pension plans are viewed as expensive and risky to maintain: Corporations are making promises to pay out benefits for decades but may not be able to guarantee their own financial success for the same period of time. If they fall on hard times, pension promises can become burdensome.

As a result, they have largely shifted investment risk to individual workers. Instead of managing investments on behalf of employees in the form of corporate pension funds, companies have formed defined-contribution plans like 401(k)s, which typically require tax-free withdrawals from people's paychecks.


If the worker's money is invested successfully, the payoff can be lucrative. But if the investments sour or the market tanks, workers, not the company, are on the hook for finding additional income.

"A pension is a promise to pay monthly benefits for as long as the employee lives after retirement," Munnell said. "For employers, a system where they bear all the costs and all the risks is not appealing."

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2. Union power has diminished
As private-sector unions have withered, so have private-sector pensions. Unions have historically championed defined-benefit pensions for their members. For example, the United Auto Workers union is currently bargaining for improved pension benefits as it continues a strike against General Motors.

But the percentage of American private-sector workers in a union was only 6.4% in 2018, compared with 33.9% in the public sector, according to the Department of Labor's Bureau of Labor Statistics.

The nation's overall unionized rate of 10.5%, which includes public workers, is down from its all-time high of 20.1% in 1983, the first year comparable BLS figures are available.

3. 401(k)s have been normalized
A series of tax law changes in recent decades has enabled the rise of defined-contribution plans like 401(k)s.

Until the 1980s, this was not a normal employee benefit. Today it is. More than 100 million people have 401(k)-style benefits, according to the Department of Labor.

Critics say it's not enough. The Economic Policy Institute says 401(k)s are a "poor substitute" for defined-benefit pensions, in part because many people simply aren't saving enough and small businesses are less likely than large companies to offer them.

But advocates say the defined-contribution approach gives workers more control over their money and they point out that defined-benefit pensions are vulnerable to corporate bankruptcy, mismanagement, and corruption.

Also, in the modern economy, many workers prize the ability to move from company to company, instead of accruing benefits at a single employer. That emphasis on mobility tends to favor 401(k)-style plans.

"It’s really only the older companies that have residual defined-benefit plans," Munnell said.

4. Public companies are under pressure to reduce pension debt
As public companies face pressure to deliver positive quarterly earnings, one area they often seek to improve is their general liabilities. That can involve slashing debt to earn a better credit rating, which typically makes it cheaper to borrow or win over investors.

When GE announced its pension moves Monday, analysts welcomed the plan.

"This move shows that GE is looking to pull any and all levers to restore its financial health," CFRA Research stock analyst Jim Corridore said in a research note.

The major ratings agencies often praise companies for reducing their pension liabilities. And despite the pivot away from defined-benefit plans, corporations still owe a lot.

The top 100 private plans alone owe their workers $1.66 trillion, according to actuarial firm Milliman. In other words, while most active employees won't be getting a pension, the legacy of America's pension system will live on for decades.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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GE

https://www.forbes.com/sites/ebauer/...4#dcc4873461ea

Quote:
In The News: To No One’s Surprise, GE Freezes Its Pension
Spoiler:
This morning, CBS News and other news outlets reported that General Electric has announced that it will be freezing its pension plans for U.S. salaried workers and executives at year-end 2020, according to an October 7 GE press release. They will replace these benefits with a 3% of pay contribution to employees’ 401(k) accounts, and match a further 8% at a rate of $0.50 per dollar. In addition, 100,000 terminated vested employees will be offered lump sum payouts of their pension rights. The freeze will reduce its pension deficit by between $5 - $8 billion.

Here’s some important context to this announcement:

In the first place, the pension plan had already been closed to new entrants, and a freeze (the elimination of new accrual) is an unsurprising next step. At the same time, the announcement reported that 20,000 salaried employees would be affected; this leaves a further 20,000 hourly employees continuing to accrue benefits, according to the 2018 10-K (see page 127 ff). The “principal pension plans” – that is, the main U.S. plans – had a combined liabilitiy of $68.5 billion, and were underfunded by $18.5 billion, $6.1 billion of which was due to the wholly-unfunded executive pension plan.

But what is important to also understand is that the liability reduction will not be the result of benefit cuts strictly speaking. The lump sum payouts will be based on the applicable government requirements for interest rates and mortality assumptions which are meant to protect plan participants, and are meant to reduce risk for the company, not cut costs. And the cost savings are the result of future benefits being calculated based on salary at the time of the plan freeze rather than allowing for future salary increases up to retirement.

And here’s the bigger picture: according to a 2018 Willis Towers Watson analysis, based on 2017 data, and looking at changes to the existing Fortune 500 set of companies over time,

Today In: Money
16% of Fortune 500 companies offered a DB plan (either traditional or hybrid/cash balance) to new hires, compared to 59% of those companies in 1998;
51% of those companies which had had an open pension plan in 1998 still had at least some workers continuing to accrue new benefits (that is, a “closed” but not “frozen” plan); and
93% of those companies still have a pension plan of some sort, albeit frozen; 7% of such companies had terminated their pension plan entirely (that is, by purchasing annuities for workers/retirees).
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However, within the Fortune 500, not all industries are alike. In a significant number of fields, all or nearly all companies provide Defined Contribution (401k) plans only. But some industries continue to offer traditional or hybrid pensions:

In the insurance industry, 50% of companies continue to offer a pension, hybrid or not, with or without a DC;
48% of utility companies do so;
31% of pharmaceutical companies (and, in particular, 23% continue to offer traditional pensions); and
30% of companies in the energy/natural resources sector.
In contrast, no companies in the high-tech field offer traditional pensions and only one out of 36 total offered a hybrid plan.

In other words, the very sectors which are so reviled as greedy and profiteering are far more likely to offer traditional pension plans than companies as a whole.

In fact, taking into account both defined contribution plans and hybrid account-type (cash balance) pensions, it is those same sectors which offer the most generous retirement plans: with a top 5 comprising of energy companies providing average contributions of 8.6% of pay; utilities 8.0%; insurance, 7.7%; manufacturing 7.6%; and pharmas, 7.5%. High-tech companies fall near the bottom, with an average of only 4.2% of pay, not much better than retail at 4.0%.

Now, whether those remaining companies with traditional pensions, will continue to offer them, or whether their path to defined contribution plans is just as inevitable as for their peers, remains to be seen, but one hopes that, in any case, their tradition of providing above-average benefits will continue.
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Old 10-15-2019, 09:49 AM
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GE

https://www.forbes.com/sites/ebauer/.../#4eee665b1ae1
Quote:
So Why Are GE’s Pensions So Underfunded, Anyway?
Spoiler:
Last week, General Electric announced the impending freeze of its pension plans to new accrual, for salaried workers and executives. And, as much as we’re accustomed to the stories of woefully-underfunded public pensions and multi-employer pensions, it’s worth taking a look at the situation at GE, and asking the question, why were GE’s plans so underfunded that they felt it necessary to take this step?

(And, yes, part of the answer is simply, “everyone’s doing it” and per the statistics in that prior article it is somewhat of a natural next step to freeze pensions to new accrual some years after closing them to new entrants, but there is more to the story.)

In the case of multi-employer pensions, the story is familiar: pension funding levels drop during bear markets, funding legislation requires that they make up the deficits within a given number of years, they apply for hardship exemptions because of the burdens that a requirement to bring the plan up to full funding would produce for participating employers, sooner or later the chickens come home to roost.

But GE?

On its balance sheet, at year-end 2018, its plans were 76% funded (see p. 127 ff). That doesn’t look too bad, compared to the levels of plans like Illinois’, Chicago’s, or Central States. But the company’s pension plans are so massive in size that this underfunding amounted to, in dollar terms, $22 billion in debt, out of a total pension liability of $92 billion. That’s 20% greater than its market capitalization of $77 billion.

And let’s break that liability down:

$68.5 billion comes from what the company calls its “principal pension plans” - the GE Pension Plan for salaried and hourly workers and the supplemental pension plan for executives.

Of this, $6.1 billion comes from the supplemental plan, which is unfunded. The remaining $62.4 is the main pension plan, which was 80% funded at year-end 2018, which translates into a $12.4 billion underfunding.

The remainder of the $92 billion comes from “other pension plans”; to what extent these are non-US pension plans isn’t clear from GE’s financial reporting but it’s no doubt a significant part of the total (the plans’ weighted average interest rate is much lower than for the “principal plans” which suggests these are plans in Europe, where rates are much lower).

And $12 billion and $22 billion, for the GE Pension Plan, and for all pension plans, respectively, is a lot of money, but that debt level has declined since its peak at year-end 2016.

So why was the main pension plan underfunded to the tune of $12.4 billion? After all, the federal government has fairly tight regulations to ensure that plans are appropriately funded. Why wouldn’t these regulations have achieved this goal?

Turns out, as far as the government is concerned, the plan is 95% funded – or, rather, as of the most recent data available from the IRS Form 5500 Schedule SB funding requirements filings, at the beginning of 2017, when on an accounting basis the plan was 71% funded, its funded status, according to the federal government’s funding requirements, was 95%, and the plan was making contributions fully in compliance with those funding requirements.

In fact, the 10-K’s statement on contribution policy says (p. 131),

“Our policy for funding the GE Pension Plan is to contribute amounts sufficient to meet minimum funding requirements under employee benefit and tax laws. We may decide to contribute additional amounts beyond this level. We made contributions of $6,000 million and $1,717 million to the GE Pension Plan in 2018 and 2017, respectively. Our 2018 contributions satisfied our minimum ERISA funding requirement of $1,500 million and the remaining $4,500 million was a voluntary contribution to the plan. We currently expect this voluntary contribution will be sufficient to satisfy our minimum ERISA funding requirement for 2019 and 2020.”

Why is there such a sharp discrepancy between the US GAAP/accounting and the statutory funding-requirement funded status? In the first place, the statutory funding requirements as dictated by the Pension Protection Act of 2006 (PPA) are based on the “accrued benefit liabilities,” that is, benefit accruals based on employees’ pay at the time of the valuation; US GAAP financial reporting uses the Projected Benefit Obligation, which calculates liabilities based on plan participants’ pay at retirement. In the second place, when interest rates began dropping drastically, Congress passed “funding relief” in the form of MAP-21 (Moving Ahead for Progress in the 21st Century Act; yes, this was tacked onto a transportation bill) in 2012, which set minimum interest rates and smoothed those interest rates; at a point when the US GAAP rate was 4.11%, the funding interest rate was 5.92%. (Readers who observe me on my soapbox regularly will know that the higher the interest rate, the lower the liabilities, and the better the funded status.) Third, plans report their assets for funding purposes on a smoothed basis, which boosts funded status in bad years and reduces it in good years. And, finally, plans file their Schedule B reporting forms after the close of the plan year and include additional contributions made in fulfillment of that year’s funding requirements, rather than the simple snapshot-in-time asset valuation used for financial reporting.

All of which leads to the larger question: should the government have had tighter funding regulations?

As it happens, in some respects, the PPA was a substantial tightening of funding requirements when it was implemented in 2006: it required plans to remedy funding shortfalls within 7 years (compared to as many as 30 years for benefit increases previously) and it required the use of a corporate bond rate rather than an expected investment return basis for liability valuations. It also provided significant room for employers to fund their plans more conservatively if they chose, although, as the American Academy of Actuaries points out in its analysis of the law, there are some shortcomings and it lacks incentives to more fully fund its pensions, particularly to a level based on its accounting liabilities, in part because, if interest rates rise again and plans become overfunded, companies can’t get that money back. And, of course, beyond this, employers are limited in their ability to fund executive pensions, and overseas pensions are a whole ‘nother story.

But the PPA is focused on ensuring that plans are well-funded on the “accrued” level that’s the amount participants are guaranteed by law. Whether companies exceed this for the sake of their financial results is a business decision like any other.


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