GM restructures U.S. salaried retirement benefits

General Motors Corp. today announced modifications to its pension and other benefits for U.S. salaried employees aimed at providing a competitive and fair benefit to future retirees, while reducing financial risks to the company.

Effective Jan. 1, 2007, GM will freeze the accrued pension benefits for U.S. salaried employees under the current defined benefit plan formula and begin the shift toward a broader reliance on defined contribution plans in the future. Salaried employees who were hired on or after Jan. 1, 2001 will move exclusively to a defined contribution plan for future service. Salaried employees hired before that date will remain in the defined benefit plan. They will receive a reduced retirement benefit for future accruals under a new career average pay formula. Pension benefits earned prior to the transition date will be preserved. The changes do not affect the benefits of the company's current U.S. salaried retirees or the vested benefits of former employees.

The changes to the U.S. salaried pension plan and related benefits follow a series of actions announced on Feb. 7 aimed at reducing the company's structural costs and improving its financial flexibility, including capping retiree health-care benefits for U.S. salaried retirees; cutting compensation for top officers and board members by up to 50 percent; and reducing the quarterly dividend by 50 percent.

Late last year, the company reached a tentative agreement with the United Auto Workers Union that would significantly reduce its hourly retiree health care costs. This agreement was ratified by members of the union and is awaiting court approval. The company also announced plans to reduce its North American manufacturing capacity, and eliminate 30,000 hourly jobs by 2008.

More information can be found here.