With a Defined Benefit plan that is over 100% funded why did General Electric (GE) announce that it was:
Freezing the U.S. GE Pension Plan for approximately 20,000 employees with salaried benefits, and U.S. Supplementary Pension benefits for approximately 700 employees.
Pre-funding approximately $4-5 billion of estimated minimum ERISA funding requirements for 2021 and 2022.
Offering a limited time lump-sum payment option to ~100,000 eligible former employees who have not started their monthly U.S. GE Pension Plan payments?
But why? Could this be it?
With 422,409 participants as of 12/31/18 the premium GE has to pay to the Pension Benefit Guaranty Corporation (PBGC) in the next week will likely be $262,315,989. Even a plan that is overfunded for valuation purposes is considered underfunded in the view of the PBGC which requires the use of much lower segment rates to determine the liabilities upon which the premiums they get are calculated.
Source: Burypensions blog
Offering a lump sum to 100,000 means GE doesn’t have to pay the PBGC premium for those who take the lump sum.