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UE-GE National Contract Negotiations

Provides Important Pension Plan Lessons
GE Turns Down
UE Appeal For Retirees' Pension Increase —
For Now


Here's the letter written by UE President John Hovis to General Electric. Writing in December, he called on the company to "in the spirit of the holiday season ...  grant to its retirees an immediate and substantial pension increase." GE, of course, was unmoved.

December 10, 1999

Dennis Rocheleau, Manager
Union Relations
General Electric Company
3135 Easton Turnpike
Fairfield, CT 06431

Dear Mr. Rocheleau:

It has now been over three years since General Electric has adjusted the pensions of its retirees. Since the last increase in November 1996, consumer prices have risen by over 6%. Moreover the modest raise granted at that time did not apply to those retiring after June 1, 1994. Accordingly, these retirees have endured price increases of up to 13.6% since they began collecting their pensions.

Living on fixed incomes as they do, GE retirees can ill afford such a loss of purchasing power. Nor does the overall inflation rate adequately reflect the sharp increases GE retirees have endured in their living expenses. To cite just one example, the United Health Care Plan which supplements Part "B" of Medicare will cost participating retirees and spouses $65.00 per person next year, a near tripling of the cost in just ten years’ time.

The loss of purchasing power weighs particularly heavily on those many thousands of GE retirees who are existing on pension multipliers in the range of $10.50 to $20.00 per month. The average pension of this group comes to around $100.00 a week. Many surviving spouses are faring even worse.

In marked contrast, both the pension fund’s assets and its level of overfunding continue to grow exponentially. As of last year the Plan was 58% overfunded (up from 31% in just three years). Each year the growth in assets substantially exceeds any increases in projected obligations. We expect that when the 1999 figures are released the overfunding will be in the neighborhood of $20 billion. No other company that we are aware of comes anywhere near this staggering number.

Under the circumstances, it seems appropriate to remind you of what we have stated in the past, namely that the Pension Plan is a benefit, and not another GE business. The Plan exists solely for the benefit of its participants, retirees, and beneficiaries. It does not exist to fatten GE’s earnings statement and therefore its stock price through the use of accounting gimmicks.

GE would also do well to remember that the efforts of its many thousands of retirees in large measure account for the company’s current unprecedented level of prosperity.

In the spirit of the holiday season, we call on the Company to grant to its retirees an immediate and substantial pension increase, and additionally to increase substantially the minimum pension multiplier.

Very truly yours,

John H. Hovis
General President
United Electrical, Radio and Machine Workers of America (UE)

Six weeks after UE General President John Hovis wrote to GE and made the case for an immediate and substantial increase for GE retirees (see text, at right), GE wrote back. Their letter of reply was hardly worth the wait.

GE's Reply:
'Not Now'

Unsurprisingly, the Company does not dispute any of the arguments set forth in Hovis’ letter. Rather they fall back on the fact that they have granted some increases in the past (five since 1981) which they say compares "very favorably with our competitors". Therefore, "GE has taken on greater obligations than were originally bargained with the UE..." Finally, GE pulls out their old refrain that "Pension levels and improvements have never been related to the value of assets in the Pension Trust." So for now at least, it’s no dice to any pension increase for retirees.

As always, it’s clear that any future increases for hard-pressed GE retirees will depend upon the extent that GE active workers and retirees around the country agitate and keep the heat on the Company over this critical issue. The best response to GE’s miserliness is letters, demonstrations, and old fashioned hell-raising every chance we get.

At the same time, we should not ignore GE’s arguments in their defense, or let them go unanswered. Let’s take a look at them one by one:


It is true that many companies have curtailed or abandoned altogether the once common practice of adjusting retirees’ pensions periodically. So in that sense, GE is correct when it says it has done more than most companies. But as is typical of GE, they only give you a small part of the story.

In the first place as we have documented elsewhere on this web, GE has no competitors worthy of the name. And just as GE outstrips the "competition" in every measure of economic performance, so too is it a fact that no real or imagined competitor of GE is in the favorable position GE is with respect to pensions. For GE the pension is a freebie. The Plan is so overfunded that GE has contributed nothing since 1987 and the likelihood is that the Company will never contribute again.

That puts GE in a position of competitive advantage over other companies. GE can easily give our retirees the pension adjustments they need and deserve and not have their cash flow affected by one red cent!

In the second place, over 90% of defined benefit pension plans require no contributions from employees. GE has taken millions of dollars from employees in pension contributions ($112 million in 1998 alone) and made a killing by investing the funds. Moreover, with the overall assets of the fund exploding upward, GE is now able to use accounting gimmicks to show over $1 billion a year in annual profits on its books attributable to the pension plan. No other company can come close to matching this. Once again, GE enjoys a competitive advantage compared to other companies.

In the third place, GE pension benefits are too low to start with. The basic pension benefits for GE hourly and non-exempt salaried workers are substantially below those in auto, steel, aerospace, trucking and many other industries and companies far smaller than GE. With each passing day, the GE Pension Plan is becoming less "competitive". Having started out with inadequate pensions in the first place, GE retirees are particularly vulnerable to inflation.

In summary, GE’s argument that it "beats the competition" on retirees’ increases doesn’t hold water. It’s like an overstuffed hog arguing that as a percentage of body weight, it eats less than a newborn piglet at suppertime.


This one is a real howler. Yes, it’s true that because GE is not legally obligated to grant retirees’ increases, that they are providing more than the union bargained over the years in negotiations. Of course what the Company doesn’t say is that they have steadfastly refused to bargain with the Union on this subject!

Many years ago the U.S. Supreme Court ruled that bargaining for retirees was not mandatory. An employer may elect to bargain about this subject as many do, but it is also legal to refuse to bargain. There was never any doubt about which option GE would pick. The Union makes its arguments anyway and GE does listen. They also make it clear however that they will not "bargain".

Thus having ruled out any real bargaining on this crucially important subject, GE now says they are giving us more than was bargained! This is an argument that defies even Six Sigma analysis.


As of last year, the GE Pension Trust had assets of about $43 billion and was overfunded by $16 billion. If it were a separate company, the GE Pension Trust would rank as one of the country’s largest industrial corporations. So naturally GE is most eager to assert that pension benefits on the one hand, and this gargantuan pile of cash on the other, really don’t have much to do with each other. And of course it is true, as GE says, that as the assets continue to grow, there is no mechanism in the Plan to increase benefits. But of course that is precisely the point!

What GE doesn’t say is that all of the assets in the pension fund legally exist only for the purpose of funding and paying benefits. The money cannot and should not be used for any other purpose! In short, though GE has kept tight control over the money, it doesn’t belong to them. It belongs to GE employees, vestees, and retirees!

GE’s hypocrisy is exposed every three years in negotiations when the union puts forward proposals for higher pensions, retirees’ increases, pension COLA, earlier retirement, and so on. One thing GE says in response is that these proposals will "cost" a lot, not in actual cash out of profits mind you, but in accounting charges or "service" costs to the fund!

Thus pension COLA which would greatly help retirees, is rejected by GE on the basis that to provide it would be a "big charge to the fund". In other words, GE says the size of the fund is irrelevant when it comes to making improvements, yet tells us our demands are rejected in part because they cost the fund too much!

The real problem is that the purpose of the Pension Trust has become utterly perverted even as it has grown in value by leaps and bounds. The Company now treats the pension fund as a GE business which, in the Company’s mind, exists to impress Wall Street, drive up the stock price, and enhance GE’s balance sheet.

It will take the concerted efforts of GE workers and retirees across the country to begin to address this outrageous state of affairs. In the meantime the campaign of GE retirees for a measure of relief will continue and is deserving of the wholehearted support of us all.

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