GM Salaried Retirement Program Changes–What Should You Do?

General Motors has decided to change its commitment under its salaried retirement program.  As a retiree, GM has given you 4 options to receive your future benefits:






Voluntary Lump Sum Payment

One-time payment to you



Continue your current monthly pension payment

Continue your current monthly pension payment in the same form as it is paid today.

Your spouse’s monthly survivor benefit








New 50% Joint & Survivor Monthly Benefit

Monthly benefit payable to you over your life time.  Your spouse’s monthly survivor benefit






New 75% Joint & Survivor Benefit

Monthly benefit payable to you over your life time.  Your spouse’s monthly survivor benefit






For option 1, GM applied IRS mortality tables, prescribed interest rates and discount rates on the value of the future payments to arrive at the voluntary lump sum payment.  The lump sum can be rolled over into an IRA, tax free.   Monthly or periodic distributions can be taken from the IRA.  Income taxes would be paid on the distributions for the year that they were received.  Check with your financial advisor on an appropriate investment vehicle.  It might be possible to create an even greater monthly distribution.  You might want to click on this link to a Fox Business article.  Unlike options 2 through 4 (below), the balance in the IRA after you and your spouse’s death will be distributed to your beneficiaries.  (Or you could just take the lump sum into income in 2012.  However, you would pay significant income taxes, most likely at the higher rates.)

For options 2, 3 & 4, GM will transfer your account to a Prudential annuity.  The monthly benefit will be fixed at the amount indicated in your notice.  It will not increase over time.  The benefit is paid to you until your death.  Then payments will be made to your spouse until their death.  At that time the contract is over and there is no residual benefits that are payable to your heirs.  Your spouse must be your current spouse.  If this is not the spouse at the time of retirement, then you must contact GM to determine the appropriate action to be taken. The income taxes to be paid on options 2, 3 & 4 are paid as you receive the benefits, the same as you currently experience.

There are several planning opportunities to consider. Mortality is at the heart of the issue.  If you are not in good health, it would make more sense to take option 1.   The balance in the IRA would go to your beneficiaries.  If you do not feel comfortable in investing the funds in today’s environment, maybe option 4 would be better for you.

This is not a decision to be taken lightly.  The documents mailed to you describe your options.  GM has additional resources at that you might want to review and of course, you should consult your financial advisor and CPA.  Your election must be made by July 20, 2012.