GM/Ford buying out retiree pensions
GM received US government approval and will be buying out retiree pensions, or converting some of them to annuities from Prudential Life.
It is ground breaking and other companies will be watching closely, as they consider outsourcing their pension commitments.
It will be a costly exercise though.
One example I read about is a 70 year old collecting 2800 per month pension. He will receive 390.000 based on 11.5 more years of life expectancy.
Just out of curiosity, in Canada if a person took the money and put it in a low interest bank account...............would they qualify for GIS benefits?
I had read the story a week or so ago, you have me a bit confused with the 70 year old. The pensioners income won't change as a result of this move from what I understand.
In the USA there are many differences in pension regulation from Canada companies in the USA can use many tax strategies that are not available in Canada.
I can understand GM/ Ford wanting to off load the liability and it can be done in the USA. In Canada once a person hits 55 in a DB pension and has ten years in such changes can't be made.
GIS eligibility is based on annual income, not assets. If the retiree is collecting CPP, OAS, and say 4% interest on $390,000 they probably would not qualify for GIS.
Originally Posted by sags
This is a link to the article with the 70 year old in it.
OK well those kind of rules won't work in Canada, I may be wrong but read the book Pension Ponzi there it highlights many issues in the USA that companies can do.
It is sad that big companies are more than willing to try and take advantage of retiree's they hire pension fund companies to put these offers together.
The big three automotive do have many serious problems with the number of retired workers for every working person. Underfunding the pensions has lead to these kind of problems in both countries, if nothing more than confusion from someone 70 plus gets them to sign the company will be happy.