GM Retirees: Swapping Pension for Annuity Too Risky

A group of General Motors Co. retired U.S. salaried employees has sharply criticized the company's plan to roll over their pension funds into group annuity run by Prudential Insurance Co. of America, which would make future monthly payments.

The General Motors Retirees Assn. tells CEO Dan Akerson in a June 13 letter that the plan is irresponsible and threatens the financial security of salaried retirees. The group objects because unlike GM's current pension plan, the annuity would not be insured by the U.S. Pension Benefit Guarantee Corp. or required to comply with federal pension standards. Retirees who watched the collapse of Bearn Stearns and Lehman Brothers in 2008 are worried about handing the money to a Wall Street company, according to GMRA.

GM is offering lump-sum pension buyouts to 42,000 of its most recently retired salaried staff. Those who decline will have their pensions moved into the annuity with the rest of the company's salaried employees and retirees. GM plans to spend as much as $5.5 billion on the move and expects the program to shrink its pension obligation by $26 billion.

The company replied to the retiree group's letter with an e-mail asserting the changes will provide salaried retirees with more choices and greater protection for retirement benefits. State insurance regulators offer protection for annuities, the company notes. Prudential would keep pension funds in a segregated account that would not be available to creditors if the financial firm were to go bankrupt.