General Motors Corp disclosed that it will freeze the accrued pension benefits for U.S. salaried employees under the current plan formula and shift toward a broader reliance on defined contribution plans in the future.
The changes are effective January 1, 2007. Salaried employees who were hired on or after January 1, 2001 will move exclusively to a defined contribution plan for future service. Salaried employees hired before January 1 will remain in the defined benefit plan. However, they will receive a reduced retirement benefit for future accruals under a new formula.
The changes have no affect the benefits of GM's current U.S. salaried retirees or the vested benefits of former employees.
The changes include the following:
- GM salaried employees hired before January 1, 2001, who currently participate in the traditional defined benefit plan with a final average pay formula will stop accruing future benefits under that formula and receive a modified future benefit based on 1.25 percent of average monthly base salary for their future years of service.
- GM salaried employees hired on or after January 1, 2001, who currently participate in a cash balance plan, will stop accruing future pay credits under that plan and receive a contribution to their salaried 401(k) program from GM of 4 percent of annual base salary. Existing balances under the cash balance plan continue to earn annual interest credits.
In addition to these actions, effective Jan. 1, 2007, all eligible U.S. salaried employees who contribute to GM's 401(k) program will receive a company match of 50 percent on the amount the employee contributes up to 4 percent of base salary.