General Electric (GE) has proposed freezing the accrual of pension benefits for its UK defined benefit (DB) pension plans, which cover approximately 2,800 employees. A 60-day consultation process with plan members will begin in February, and, if implemented, the freeze would come into effect Jan. 1, 2022.
The freeze would affect all members of the GE Pension Plan and the GEAPS Pension Scheme in the UK, who would be automatically enrolled into GE’s existing defined contribution (DC) plan. The company is also proposing a temporary 2% increase to the default 10% employer contribution for the first two years, and said there would be no change for GE retirees already collecting pension benefits, and no change to existing benefits accrued by active members through the end of 2021.
“The proposed changes to our UK defined benefit pension offerings are difficult but necessary as we continue our work to accelerate GE’s transformation,” GE Chief Human Resources (HR) Officer Kevin Cox said in a statement. “We are actively managing GE’s pension obligation by considering market trends and employee impact while thoughtfully balancing our company priority to solidify our financial position.”
GE said its pension benefit obligation in the UK was approximately $14 billion as of the end of last year, and that its proposals would further its objectives of actively managing pension costs and risks. GE has taken several actions in recent years to manage its pension obligation and deficit.
In October 2019, the company froze its US GE Pension Plan and US Supplementary Pension for salaried participants and offered a limited one-time lump-sum payout to eligible former employees. The plan covered approximately 20,000 employees with salaried benefits and approximately 700 employees with supplementary benefits. The move helped the company reduce its retirement fund deficit by as much as $8 billion.
And last month, GE voluntarily pre-funded its estimated minimum Employee Retirement Income Security Act (ERISA) funding requirements for the GE Pension Plan for 2021, 2022, and into 2023 to help support its future commitments to employees. GE also transferred some US GE Pension Plan obligations by purchasing group annuity contracts from Athene. The GE Pension Plan has been closed to new entrants since September 2011.