Retirees Thought GE Would Take Care Of Them. Then It Didn't

Ted

FYI: Back in 1971, when he went to work at a General Electric Co. plant in upstate New York, John Phelps probably wasn’t naive in believing that the company would take care of him to the grave.

That was reasonable in those days, when so many jobs in the U.S. still came with generous long-term benefits. And in fact, Phelps clocked out in 2013 at age 64 with a pension, a rare thing in the 21st century.
Regards,
Ted
https://www.fa-mag.com/news/retirees-thought-ge-would-take-care-of-them--then-it-didn-t-42448.html?print

Sven

Problem is majority of private industries and public pension are underfunded by at least 50%. This poses significant risk to meet the obligation to pay the retiree's pension. When the company undergo financial stress such as declining business (i.e. GE) and bankruptcy, the pension gets reduced substantially as in the case of General Motors. Many GM union workers received pennies on a dollar on their promised payout. I understand IBM is underfunded by 80%. The kicker is that this is perfectly legal. Guess paying big bonus to the top executives is more important than fulfilling their promises to the employees.

msf

IBM's pension plan is relatively well funded. In the 90s and 00s its move to a cash balance plan cut its liabilities in a major way, but had the effect of discriminating against older workers. It settled a suit for $320 million. Mother Jones tacitly affirms that this was the end of legal actions against IBM, as its 2018 article about ongoing IBM age discrimination only mentions this one pension settlement.

As of the end of 2016, IBM's remaining pension obligations were 98.4% funded according to the first source (based on company reports), and 89.9% funded according to Milliman (which also has 2017 data).
https://www.pionline.com/article/20170417/INTERACTIVE/170419916/the-funded-status-of-corporate-pension-funds
http://us.milliman.com/PFS/

With respect to the subject of the original article, GE was underfunded by about 36% at the end of 2016 (according to the first source).

For legal/actuarial wonks, here's a writeup from an employer-side legal firm on the legality of cash balance conversions. Note: this is really wonkish.
https://www.littler.com/10th-circuit-puts-another-nail-coffin-cash-balance-plan-litigation

MikeM

The "funded" pension data is a factor of estimated future return. It was pretty typical in the '90s and 2000's for companies to use very unlikely return estimates to make it look like they were properly funded. Maybe it still is typical. I remember the Kodak pension plan using 8-10% return estimates to say they were 100% funded back in the day. The purpose of overstating future balance? I believe government rules say a company only has to put additional money into their pension fund IF that %-funded reaches a specific low level. So given the choice of counting money as current profit or addressing future liability, which do you think they'd choose?