GM to Shrink Pension Liabilities

General Motors Co. is overhauling its U.S pension plan for salaried workers to reduce its obligation by about $26 billion, or one-fifth.

GM will offer 42,000 of its 118,000 salaried retirees a lump-sum pension payment in lieu of ongoing monthly payments. The move mirrors Ford Motor Co.'s offer of lump-sum payments to salaried retirees.

For retirees who decline the lump-sum option, GM plans to purchase a group annuity from Prudential Insurance Co. of America, which will make their future monthly payments.

GM expects to contribute $3.5 billion-$4.5 billion in cash to the salaried plans to cover the purchase of the group annuity and add about $1 billion to pension funding. The company aims to complete the transactions by year-end, pending regulatory approval. Prudential would begin making payments in January 2013.

GM also intends to set up a new pension plan for active salaried employees that will have the same provisions as the existing plan. At retirement, those workers can choose a lump sum or regular monthly payments.

None of the changes affect GM's U.S. hourly pension plan.