GM Pension Plan Underfunding Rises in 2011

General Motors Co.’s U.S. pension plan obligations grew faster in 2011 than its plan assets as low interest rates inflated the value of plan liabilities.

In its annual 10-K report, GM disclosed Monday that the value of promised benefits jumped to $108.6 billion at the end of 2011, up from $103.4 billion at year-end 2010. U.S. pension plan assets increased to $94.3 billion, up from $91.0 billion a year earlier.

With liability growth outpacing asset values, plan underfunding rose to more than $14.2 billion at year-end 2011, up from $12.4 billion a year earlier.

To reduce liability growth, GM will completely freeze defined benefit plans covering salaried employees, effective Oct. 1, completing a process it began several years ago. Affected employees will receive additional company 401(k) plan contributions.

GM also disclosed that it expects a significant decrease during the next several years in the amount of pension benefits paid to plan participants. This year, GM estimates its U.S. pension plans will pay $8.5 billion in benefits. By 2016, payments will drop to $7.6 billion.

And even bigger reductions in pension plan payouts are down the road. GM, in the 10-K filing, said it expects to make $35.4 billion in payments from 2017 through 2021, down from $40.4 billion for 2012 through 2016.

General Motors Co.’s U.S. pension plan obligations grew faster in 2011 than its plan assets as low interest rates inflated the value of plan liabilities.

In its annual 10-K report, GM disclosed Monday that the value of promised benefits jumped to $108.6 billion at the end of 2011, up from $103.4 billion at year-end 2010. U.S. pension plan assets increased to $94.3 billion, up from $91.0 billion a year earlier.

With liability growth outpacing asset values, plan underfunding rose to more than $14.2 billion at year-end 2011, up from $12.4 billion a year earlier.

To reduce liability growth, GM will completely freeze defined benefit plans covering salaried employees, effective Oct. 1, completing a process it began several years ago. Affected employees will receive additional company 401(k) plan contributions.

GM also disclosed that it expects a significant decrease during the next several years in the amount of pension benefits paid to plan participants. This year, GM estimates its U.S. pension plans will pay $8.5 billion in benefits. By 2016, payments will drop to $7.6 billion.

And even bigger reductions in pension plan payouts are down the road. GM, in the 10-K filing, said it expects to make $35.4 billion in payments from 2017 through 2021, down from $40.4 billion for 2012 through 2016.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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