Tuesday, July 03, 2012

GM sets example on pension management by deal with Prudential

Business Insurance has some details about the ways some large companies are reducing their pension obligations, particularly GM.

GM is “replacing” its pension obligation with an annuity product managed by Prudential, and retirees will get their checks or direct deposits from Prudential.  This is supposed to save GM $26 billion.

GM retirees also can choose to get a lifetime lumpsum benefit and invest it themselves in an annuity of their choice.

With this strategy, the insurance company manages the interest rate “risks” and takes it off the backs of the employer with the pension obligations. This could be helpful to municipalities.

The link for the story (June 17) is here.

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