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UE-GE National Contract Negotiations

Out of Focus

GE Blurs
Pension Issues

Out of Focus ...

There’s always one sure sign that National Contract negotiations are just around the corner. That is when various GE benefit specialists take to interviewing themselves. You may have seen a piece recently put out by the Company in which GE pension expert Mike Gorman holds forth about "GE’s retirement income programs", supposedly in response to questions from something called "GE Focus".

Gorman is new to the Company, and has never participated in National Contract negotiations, but it is obvious that he is a fast learner. You see, the real purpose of his "interview" is to convince us that the GE pension is a really good deal as it stands now, and that we shouldn’t get our hopes up about anything other than minor improvements in it come June. Now in order to convince us of this, the more time spent focusing on things other than the Pension Plan the better.

So like his predecessors, Gorman has lots to say about Social Security, the S&SP, employees’ personal saving habits, etc. At one point he even offers advice on how employees should invest their own money. This assumes of course that we have any to invest.


One way GE could provide us with a few bucks to invest would be to eliminate the mandatory pension contributions we’re forced to pay. After all, over 90% of defined benefit plans require no employee contributions, and GE itself has not put one thin dime into the huge Pension Fund since 1987. But instead, Mr. Gorman invites us to contribute even more!

As he states, "If you want to add to your pension benefit, you can participate in the Voluntary Pension Account..."! This means ponying up 3% of pay from the first dollar instead of after $37,500 of earnings. That way we’ll have yet another source of "replacement income" for Mr. Gorman or his successor to be interviewed about three years from now.

All of the talk about "sources of replacement income" serves of course to divert our attention from the inadequacies of the GE Pension Plan which quite simply does not provide GE workers with anything close to what is needed for a secure and dignified retirement. To illustrate, let’s take a look at some of GE’s assumptions.


To maintain the same standard of living after retirement as you had while working, Gorman states that you need to replace about 70% to 80% the earnings you had while employed. This is done by means of the GE Pension, Social Security, and personal savings, or what GE usually refers to as the "three-legged stool". Why do we need only 70% to 80% you may ask? Good question. Gorman says in essence that retirees save a bundle simply by not working! "For example, you will no longer have deductions for Social Security or S&SP", he states. Hey, and think of all you’ll save by not feeding the plant vending machines too!

So on the one hand, GE maintains the pension need not replace too much of our income since we have Social Security and S&SP. On the other hand, they say we need to replace even less of the income we had while working in part because we’re no longer paying in to Social Security and S&SP! The end result is that in order to pretend that the pension is up to snuff, GE actually counts Social Security, which we pay into on 100% of our earnings, as well as our own savings against us, not just once but twice! This kind of a numbers game would make Enron blush.


Not surprisingly, the Gorman interview leaves out any discussion about what GE retirees actually face. The fact is that a typical GE hourly worker who retired during this contract term stands to get a basic pension of only about $1,200 per month. Naturally, this will vary considerably, and some will get more and some less.

Having an inadequate pension to begin with, GE retirees have their work cut out maintaining a decent standard of living. For openers, the Company provides no vision or dental coverage for retirees, so any bills for these items, as well as for a variety of other uncovered medical expenses comes right off the top. And as everyone knows, GE just whacked pre-65 retirees in HCP with substantial co-pay increases which can amount potentially to hundreds of dollars per year.

If that weren’t enough, GE has also made it plain that it will seek additional medical cost shifting from post-65 retirees in negotiations, including for prescriptions. We’ll see if the upcoming "interview" with a GE insurance expert mentions that.

Beyond this, costs to retirees for insurance coverage for hospitals and doctors is considerable. If you take just what it costs for a pensioner and spouse to pay the Medicare Part "B" premiums, and to participate in the optional GE plans to supplement Medicare, the cost in 2003 comes to just under $300 per month. So right there, a retiree with a $1200 pension is down to $900. Then there are little items like food, fuel, utilities, and housing to deal with (except if you’re Jack Welch).

Even if your GE pension were adequate to begin with, your purchasing power begins to decline from the day you retire. That’s because the GE pension has no COLA. With no protection against inflation, the longer you are retired the less you have to live on. But of course Mr. Gorman has not a word to say about this. (For information on the plight of GE retirees, see UE General President John Hovis’ recent letter to the Company.)


Using graphs to illustrate, the Gorman piece attempts to show that the GE pension replaces about 38% to 42% of our income as active workers when we retire. So for example GE says that a worker earning $40,000 will get a 38% replacement, which GE calculates to be $1,273 per month. This is certainly nothing to brag about, but in fact it greatly overstates what the pension typically provides.

In the first place, GE assumes 35 years of service at retirement. But as they well know, for many years the average GE retiree has been going out with only about 27 to 28 years of service. (Many of us are booted out well before that.) Therefore all of GE’s examples presume a career that has lasted 25% longer than the actual average.

In the second place, the Company has the audacity to count our own contributions as part of income that GE is replacing! As they admit, the examples include the Personal Pension Account which is derived from our own contributions since 1989. We in fact have paid taxes on this money before GE scooped it. (We won’t even get into the pre-1989 contributions which have been lost to us altogether.)

In the third place, the examples all presume no survivorship option, which GE retirees often elect. For example, a retiree taking the 50% option with a spouse of the same age has another 6.5% lopped off the pension.

You get the picture. As things stand now, a typical GE worker who retires with a "high three" of 40,000 in earnings will get a basic GE pension (excluding supplements) of between $900 and $1,000 a month, and an average replacement of income from the GE Pension of only about 28% and not the 38% in their example. Not surprisingly, GE’s own data from three years ago showed that UE members who took optional retirement in 1999 averaged only 28% replacement of their income from the GE Pension regardless of earnings history.

When you combine the actual amounts GE workers stand to get in basic pension with the absence of any COLA protection for retirees, it’s easy to understand that GE workers from coast to coast are clamoring for substantial improvements in what the GE Pension Plan pays. That, and not Social Security or personal savings, is the issue!


Another major pension issue of concern to GE workers is early retirement. In 1979, we negotiated a full, unreduced pension at age 60. There have been no changes in the voluntary early retirement age in the 24 years since that time. Many GE workers, anxious to escape the GE pressure cooker, quite reasonably assume that we’re way overdue.

Mr. Gorman however says that GE is concerned about "significant human resource and financial implications" and that "For a number of reasons, elective retirement before age 60 has not been attractive to GE". No kidding.

In plain English, the two main reasons why GE continues to resist earlier voluntary retirement are as follows:

  1. They are simply too cheap to spend the money, preferring among other things to spend billions on acquiring scores of other companies when not lavishing perks on their executives. This despite the fact that last year they made over ten times the net profits they made in 1979 when age 60 became the early retirement standard.

  2. The old skills drain argument which holds that GE can’t stand what Gorman refers to as "the potential for loss of skilled talent". This is more than a little ironic in that GE continues to exercise their "right" to impose involuntary "retirement" whenever they choose, as tens of thousands of laid off and displaced GE workers, skilled and experienced, can attest.


As usual, the Pension Plan will be one of the most important subjects of the upcoming negotiations. We have between now and June 15 to raise our voices in support of the major improvements GE workers need and deserve including:

  • Substantial pension benefit increases

  • Better early retirement opportunities

  • Pension COLA for past and future retirees

  • An end to mandatory pension contributions

Unity is the Key in 2003!

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