The General Motors Retirees Association is dedicated to three major purposes:
-- To urge the preservation and, if possible, the enhancement of pension, health care and other benefits earned by GM retirees through their years of labor and loyalty to GM.
-- To help strengthen General Motors to the best of its ability and, to the extent consistent with retirees' interests, use its network of retirees and public relations assets to support General Motors' business.
-- Work through the National Retiree Legislative Network to gain federal legislation that ensures fairness and justice are accorded to retirees.
For more information, visit www.gmret.org.
JANESVILLE — If General Motors files for bankruptcy, thousands of local retirees could see cuts in their monthly pensions and their health care benefits.
As a June 1 deadline for the automaker's government-ordered reorganization looms, GM retirees—particularly those younger than 65—fear that their pensions would be slashed if the automaker files for bankruptcy.
While there are plenty of 'ifs', all indications point to a GM bankruptcy that could lead to the end of the automaker's plan that pays the monthly pensions of about 650,000 retirees.
Such a move certainly would impact the more than 4,000 GM retirees represented by United Auto Workers Local 95 in Janesville. It would also affect the salaried retirees of the local plant, a number that's undetermined but estimated to approach 1,000.
A bankruptcy filing doesn't necessarily mean the termination of the pension programs, but struggling steel companies and airlines have used bankruptcy to get out from under large pension obligations.
The pension plan of Northwest Airlines, however, remained intact as the company launched a 19-month reorganization in 2005.
Regardless of whose numbers are used, the GM pension trust fund is under funded.
GM has said its hourly and salaried pension funds ended 2008 with about $84 billion in assets, 13 percent less than the $96 billion needed to fully fund its pension obligations. Other sources have said the fund is up to $20 billion lighter than it should be.
James Seward, an associate professor of finance, investment and banking at UW-Madison, said if GM files for bankruptcy, it likely would terminate the pension plan and offload its obligations to the Pension Benefit Guaranty Corp.
The PBGC insures private-sector pension plans and pays benefits to workers when plans fail. It likely would pick up a portion—but not all—of the unfunded obligations.
Depends on age
The shortfall likely would hit retirees in the form of smaller benefits. Some analysts have said retirees on average could see a 10 to 20 percent reduction in monthly pensions.
But that reduction likely will be much larger for workers age 55 to 62, said Karen DeOrnellas of the newly formed General Motors Retirees Association.
The national advocacy organization formed in March to preserve pension, health care and other benefits of GM retirees.
"If GM terminates the pension plan, the younger workers will see a pretty significant cut—30 to 50 percent," DeOrnellas said, noting that GM already has taken billions from the pension plan for use in other areas.
"The older retirees should see little if any reduction."
Monthly pensions for employees 65 and older typically average more than $3,000, she said.
The younger retirees would be hit hardest because they'd qualify for a much lower maximum pension if the GM plan were assumed by the government: $18,900 a year at age 50 ranging to $54,000 for employees 65 and older.
'A promise made'
Seward said the addition of the Chrysler and GM pension plans could significantly drain the PBGC, which since October has assumed pension payments for another 70 struggling companies.
The PBGC insures the pensions of 44 million Americans. Its representatives have met with President Obama's auto task force on the impact of a GM or Chrysler pension plan termination and have been making preparations for the possibility.
PBGC acting director Vince Snowbarger recently told a Detroit newspaper that the termination would have a major impact on retirees.
"The fact is that people are going to see some reductions that obviously they hadn't planned for," he said. "They have had a promise made to them that is not being kept, and all we can do is try to step in and help out a little bit."
Health care
DeOrnellas said her group also is concerned about the continuation of health care benefits if GM enters bankruptcy.
Both hourly and salaried employees have gotten health care cuts and increased out-of-pocket expenses in recent years. The trend, she said, is expected to continue. The extreme case would be all health care coverage getting wiped out.
"GM has already canceled medical, dental, vision, hearing aid, prescription drug, extended care and catastrophic coverage for salaried employees older than 65," she said. "GM agreed to pay an extra $300 a month to make up for it, but that doesn't begin to cover those benefits."
And next January, GM will end health care coverage to retired salaried workers who are younger than 65 and eligible for Medicare because they are disabled. They will get a $260 monthly medical expense credit.
Vision and dental care are reportedly on the cutting block for hourly retirees.
"As we look forward, health care coverage is a major concern," she said.
Seward said it's difficult to speculate on the outcome for health care coverage if GM enters bankruptcy. If one plan is terminated, others might be available under federal COBRA laws, he said.
DeOrnellas and Seward said the new administration in Washington seems interested in some form of national health care program.
"The auto industry is very supercharged right now," Seward said. "But there's a new administration that's gotten involved, one that I think will work in the best interests for health care and pensions.
"But there will still be political fireworks."
DeOrnellas said her group has been working around the clock on the pension and health care issues. While the GMRA primarily focuses on salaried retirees, it's been adding members from the hourly ranks every day.
"The future of pensions and health care are certainly the No. 1 topic of retiree groups around the country," said DeOrnellas, who retired in 2008 after a 31-year career with GM.
"People are frightened and extremely confused. They feel betrayed by GM. They were loyal to company and were told the company would be loyal to them."