Major Companies Undergoing Pension Changes - John Patterson & Denis Curcio
October 17, 2019

Major companies undergoing pension changes – Will you or your family be impacted?

Authors: John A. Patterson, CFP® & Denis R. Curcio, CFP®


Last week, GE made headlines by freezing pension plans and offering a limited-time, lump sum distribution window for certain employees. What does this mean?


When a company freezes its pension plan, they are attempting to de-risk. As the term implies, de-risking is a strategy plan sponsors can use to help reduce volatility and liability with respect to their company’s defined benefit plan obligations. Plan sponsors who maintain defined benefit plans must meet certain funding requirements to ensure that they can satisfy employee benefit obligations at retirement. Funding shortfalls require higher contributions and reflect negatively on corporate balance sheets. Pension de-risking has become a common practice as plan sponsors look to reduce the financial liabilities of their defined benefit plans.

Some companies besides GE that have taken action include National Gypsum, IBM, Daimler, and Celanese. Employees, former employees and retirees could be faced with crucial, time-sensitive retirement planning decision points.


De-risking strategies


Each plan sponsor’s situation is unique. Therefore, a strategy that works well for one may not be ideal for all. The following de-risking strategies have become common with plans looking to reduce defined benefit liability:

  • Offer early retirement options or early lump sum options to current participants
  • Provide lump sum options to retirees and beneficiaries already receiving annuity payments
  • Freeze the plan ─ preventing additional participants to enter the plan, freeze future benefit accruals, or both
  • Shift future benefit liabilities to outside insurance carriers
  • Terminate the plan
  • Utilize liability-driven investment (LDI) strategies to better fund plan liabilities


Carroll Financial can help navigate the uncertain waters of de-risking strategies


If you or someone you know is a pension plan participant faced with a de-risking decision, we can help in the following ways:

  • Learn and explain the features of the defined benefit plan and what is changing.  Determine if the plan offering early retirement packages, a one-time lump sum distribution option, or has the plan decided to purchase an annuity from an outside carrier for retirees?
  • Help manage decision point timelines and election windows regarding payment options, if applicable.
  • Help understand the pros and cons of annuity payments vs. lump sum payments and rollovers in light of your personal financial situation.
  • Work with your tax professionals regarding the impact of various payout options.


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Retirement Income, Saving
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