GM Solvency Letter to plan members
In July 2013 GM sent out letters to all our GM members active and retired, the letter created lots of calls and questions regarding the solvency of GM pensions. The GM pension rep Rob Acker, contacted Jo-Ann Hannah the Director of Pensions and Benefits and asked for a letter of clarification to post on our website, which follows.
At the end of July 2013, GM mailed out the annual update on the funded status of the pension plan to all active members and retired members of the GM Pension Plan. The annual update is a requirement under the solvency funding relief in 2009.
2009 was a difficult year for pension funds after the 2008 economic crash. The Ontario government offered companies the option to fund part of their shortfall over 10 years rather than 5 years. However, the condition was that the company provide annual reports on the funded status of the pension.
All the Detroit 3 (Ford, GM, Chrysler) companies as well as many others in Ontario choose to take the funding relief.
In November 2012, the Ontario government introduced new temporary solvency funding relief measures for new funding shortfalls. GM, however, is not allowed to use the 2012 funding relief.
In the GM letter to the plan members, there is information on the GM pension fund status. A key point of information is the transfer ratio. This is the bottom line – how much money is in the plan if it were to wind up. The GM transfer ratio is 62.6% for 2012 compared to 62.8% for 2011. Essentially, there is no change in the GM funded ratio. This is good news (in the pension world) as 2011 and 2012 were difficult years for pension funds in Canada. GM had good investment returns and was able to hold the 2011 funding ratio.
Other considerations in assessing the funded status of the GM pension plan:
- The plan has improved since 2009 when the transfer ratio was 45.3%
- A 0.2% drop in transfer ratio is not significant
- Such a small decline in transfer ratio is actually quite encouraging because 2012 was a very bad year for defined benefit pension plans. The Ontario government introduced temporary funding relief measures in November 2012 to deal with the major drop in funding for Ontario DB pension plans.
- The GM letter talks about the temporary funding relief measures that GM took in 2009 (as part of the recovery plan). GM is not taking any further funding relief measures.
For further information contact your Local GM Pension Rep.
Pensions and Benefits