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GE boosts pensioner pay
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April 17, 2000: 8:22 p.m. ET
Move comes amid pressure on GE and IBM to amend pension plans
By Staff Writer Jeanne Sahadi
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NEW YORK (CNNfn) - General Electric on Monday voted to give pensioners their first cost-of-living raise in four years, amid mounting pressure on companies like GE and IBM to initiate pension reform.
Both companies are facing shareholder resolutions next week on different issues based on claims that longtime employees are getting short-changed when it comes to their pension benefits.
IBM has been on the hot seat for more than a year over its controversial cash-balance pension plan, which can in some cases dramatically cut veteran workers' pensions.
Big Blue has been shifting away from a traditional plan, where your benefits accelerate in the last five years of your career, to a cash-balance plan, where you accumulate benefits at a steady pace.
The two resolutions won support from several camps, including Institutional Shareholder Services, which makes proxy recommendations to large institutional investors of the two companies.
"What we're seeing is an employee pension revolution in this country," said Karen Friedman of the Pension Rights Center, a non-profit group based in Washington.
Big changes at Big Blue
The IBM proposal calls for all employees, regardless of age, to receive the same choices for pension plans and medical benefits in retirement.
After announcing the switch to a cash-balance plan, the company allowed employees within five years of retiring to choose between the traditional and cash-balance plan. They then amended the plan to allow more workers to choose. Under the resolution, every employee would be given the choice.
Another big issue in the proposal is a change that would allow workers to receive supplemental Medicare insurance after retiring, a feature under the old plan.
 In a letter to the Securities and Exchange Commission contending that the proposal be omitted from proxy materials, IBM said, among other things, the proposal would affect fewer than 5 percent of its shareholders.
The SEC said the proposal should be included "(i)n view of the widespread public debate concerning the conversion from traditional defined benefit pension plans to cash-balance plans."
ISS, in issuing its support for the proposal last Friday, said in a statement, "The unveiling of the new plan has resulted in negative public sentiment and poor employee morale, which, in our opinion, could have a material adverse effect on the company. We believe these potential adverse effects outweigh any gains the company may recognize on paper as a result of the new retirement plan."
Efforts to reach someone at IBM for comment were unsuccessful.
Unions laud GE move
At GE, the pension increases will go primarily to workers who retired on or before June 1, 1997. They will receive up to $60 a year for each year of service. The same applies to workers who left the company before retirement but had worked for GE for 25 years or more.
A coalition of 14 unions representing GE workers welcomed the move.
"GE's action today is the right and fair thing to do. But this is only the first step along the road to pension fairness," said Edward Fire, chairman of the Coordinated Bargaining Committee.
 GE has a pension surplus of nearly $25 billion, and CBC is pushing for a string of changes to put more money in pensioners' hands. For example, CBC wants GE to change the formula it uses to calculate pensions so cost-of-living adjustments are built in. CBC also thinks GE could use some of that surplus to boost benefits.
"They should improve the pension formulas. It's the workers' money in the plan," said Robert Muehlenkamp, CBC campaign coordinator.
GE denied that its announcement Monday was related to the shareholder vote next week.
The shareholder proposal would prevent the GE board from providing pension or other retirement benefits to outside directors without shareholder approval. Outside directors earn $75,000 a year in salary.
ISS pointed out that only 8 percent of large U.S. corporations offer retirement plans for directors, who often meet fewer than 10 times a year. That's down from 71 percent five years ago.
"Shareholders object to these plans because they can align directors' interests with management rather than with shareholders," ISS said in a statement. 
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