DETROIT -- General Motors Corp., following in the footsteps of other large employers trying to cut pension costs, said yesterday it will shift its pension program for salaried employees from a defined-benefit plan to one that relies more on employee contributions.
Effective Jan. 1, GM will freeze the accrued pension benefits for approximately 40,000 US salaried employees. The change won't affect retirees.
Salaried employees hired on or after Jan. 1, 2001, will move to a defined-contribution plan. Those employees now have a cash-balance plan, which works like a traditional defined-benefit plan but allows participants to collect benefits in a lump sum at retirement instead of in monthly checks. GM said those employees will continue to earn annual interest on the balance in their plans, and will get a contribution of 4 percent of their annual pay to a 401(k) program.
Salaried employees hired before Jan. 1, 2001, will remain in a defined-benefit plan but will get reduced benefits under a new formula.
GM said last month it would alter its salaried retirement plans to reduce pension costs. The changes are expected to reduce GM's year-end 2006 pension liability by about $1.6 billion.
''These changes will reduce financial risks and future costs for GM, while protecting current retirees' and employees' earned pension benefits and providing competitive and fair retirement benefits going forward," GM chief executive Rick Wagoner said in a statement.