Benefits, Pensions and 401k Information
On 5/27/09, I attended a meeting in Troy, Michigan regarding a variety of Benefits, Pensions and 401K subjects. The meeting was conducted by an investment firm called "InvestWise" and not supported or recommended by Over The Hill Car People, GM or any other affiliated group. There were 250 attendees (approx.) and another 250 are scheduled to attend the same presentation 5/28/09. The subjects were:
The meeting was opened with a statement that unfortunately, GM is no longer run by the company or the Court House, but rather the White House.
The information covered four stages of Employees:
The presentation was 1.5 hours long and was heavily focused on 401K/IRA information (naturally as InvestWise is an investment firm and they would like to have our business). We do not endorse or recommend InvestWise or any other company. This is a decision you must make for your individual interest. We just attended the meeting for our own information and are sharing what we learned.
They described the two phases of bankruptcy directly from a Fact Sheet from the US Department of Labor, stating that in "Chapter 7, the company liquidates its assets to pay its creditors and ceases to exist. Therefore, it is likely your pension and health plans will be terminated." In a Chapter 11 Bankruptcy, it "...usually means that the company continues in business under the court's protection while attempting to reorganize its financial affairs. A Chapter 11 bankruptcy may or may not affect your pension or health plan. In some cases, plans continue to exist throughout the reorganization process." In other words, there is a possible status quo on pension and health benefits.
In either event, your 401K is held separately completely protected from creditors or General Motors. There are, however, occasions when your access to your 401K is questionable. There is a possibility of a freeze on these funds, but most often such freeze is temporary, not lasting more than one or two months. Because of that possibility, a Rollover to a self managed IRA was strongly suggested. (Again they suggested that if you needed help with this that InvestWise be contacted) Since there were many "still active" employees in attendance, they described an in-service rollover of funds invested prior to 1987 (would be after tax money) or rolling your 401K to a Roth IRA and went on to discuss the restrictions on that type of rollover. They pointed out that you can rollover your money without penalty at age 59 1/2 or at any separation of service (retire, quit, fire, etc.) They emphasized that "you should have no after tax money in your 401K". (Note: you can find out if you have any after tax money in your account by calling the GM Benefit Center at 1-800-489-4646). They also pointed out that after 1/1/2010; there will be no income level restriction on Roth IRA's (unless congress eliminates that provision before then!)
Since Promark Income Fund is very popular with GM Employees and Retirees, they presented three pages of plus and minus notes on that fund. They cited a lack of transparency and in my view appeared to down grade use of this fund.
They discussed a provision that you can do a stop loss on IRA's just as you can do with stock investments. It is a type of insurance on your savings plan that has a premium of about .5%. (Note: I called our investment manager this a.m. and he advised that you can in fact do this, but it only pays on death so is not much protection for us now.)
There was a question about leaving your 401K to a trust as beneficiary and the speaker advised that a trust cannot own a 401K or IRA. If, in fact you do have a trust as your beneficiary, at the time of your death, the 401K or IRA would go to the trust, but immediately be disbursed to the beneficiaries of the trust as a taxable event.
He briefly discussed ways to get your hands on ready cash if in fact you are having difficulty making your payments, etc. A Home Equity Line of Credit (HELOC) (if you already have one) was one of the means, but he cautioned that most banks have already reduced the amount they will pay due to the reduction of home values.
Loss of health care was next, advising consideration of your spouse's insurance, COBRA, MEDICARE at age 65, and possible tax credits for health care in the event of total bankruptcy.
Then to the point most of the attendees were interested in and that was the continuation of pensions in the case of bankruptcy of any kind. The GM pension fund, both salary and hourly is insured by the Pension Benefit Guarantee Corporation (PBGC: website http://www.pbgc.gov/). For salaried employees, both Part A and Part B are insured. There are, however, some limits. They are based on your age at the time the PBGC takes over the plan as well as your age at the time of your retirement if you are not yet retired. If you are not retired, the limit depends on your age when you begin to receive benefits. Go to the http://www.pbgc.gov/ for a maximum guarantee table. You will find that most interesting. The law also restricts benefit supplements, such as money that is paid to bridge early retirees to social security and limits pension increases during the past five years. (This might be the $300 we just received to allay cost of health care, but no one is certain of that yet). If you are passing this information on to someone who does not have a computer and they wish to contact the PBGC, the number is 800-400-7242 from 8 a.m. to 7 p.m. weekdays.
One other benefit most GM salaried employees do not know about is the ability to roll a lump sum payment of GM pension to your IRA. It is tax free and takes about 2 months. They strongly urged that you consult your tax person before doing this, but it might be an option for the younger person that is separated without eligibility to retire at the time of the separation. They still have a pension lump sum (dependent on length of service of course), that might be rolled over and used in a more beneficial manner in their IRA.
The statements above are from the best of my recollections and notes from the meeting. In no way am I implying they are 100% factual and we strongly suggest you discuss your individual situations with GM, GM Benefits, Fidelity, and other professionals before taking any actions. The above information is not endorsed by me, GM, or Over The Hill Car People. It is for information purposes only. Please refer all questions concerning the above to the PBGC, InvestWise, GM, GM Benefits, Fidelity and other professionals.
Vi Springer
VP Human Resources Director
Over The Hill Car People LLC
01234052709128