Asking future retirees to cash out early from defined-benefit pensions can help close the funding hole at GE. Falling interest rates and uncertainty over the success of its turnaround could help the company get the better end of the deal. johnsfoley
General Electric on Oct. 7 proposed adjustments to defined-benefit pensions, including an offer of a lump sum to around 100,000 former employees who have not yet begun to claim benefits.
Companies with pension schemes covered by the Employee Retirement Income Security Act are free to make such offers to participants, but the Internal Revenue Service demands that offers meet certain minimum requirements. The main variables are the discount rate used, which is updated by the IRS each month, and mortality assumptions. GE has not disclosed publicly the terms it is offering its former employees.
The company reported a $27 billion gap between its pension assets and liabilities at the end of June. GE includes that, after tax, in its $54 billion reported measure of net debt.
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