At General Electric Co., 2010 ended like the 22 years immediately before it. The company won't make a contribution to the GE pension plan.
GE has not made a contribution to the defined benefit plan since 1987.
This remarkable record of corporate achievement and corporate employee well-being has translated indirectly to the bottom line, at least in terms of freeing cash that would have been contributed to the pension plan to be used for operations. It is testament that defined benefit plans, properly managed, can be affordable and sustainable.
With principal plans having a combined $42 billion in assets and $48.1 billion in liabilities, including $3.8 billion in liabilities from a GE unfunded supplementary plan, as of Dec. 31, 2009, — GE is a contrarian among large corporate pension plan sponsors in not having terminated or curtailed its defined benefit plan. GE has a $16.2 billion 401(k) defined contribution plan, but it has kept its defined benefit plan strong.
Over the 23 years, the defined benefit plan has paid billions in pension benefits, including $2.8 billion in 2009, the latest year available. As of year-end 2009, the plan covered 635,000 participants, including 239,000 retirees and beneficiaries.
In a competitive global market, the long-term stable past of GE's defined benefit plan does not necessarily predict a secure future, or mean the company won't ever decide to change its policy and curtail the plan. But the defined benefit plan has thrived in vastly different market and economic environments, from bullish to bearish, from booms to recessions. It has done so all without a corporate contribution.
One reason it hasn't contributed in past years is that, when the plan was fully funded, that status precluded tax deduction of a contribution, which would have triggered an excise tax.
General Electric deserves to stand as a model of the defined benefit system. Other corporations, as well as public retirement systems, ought to examine it for valuable insight in managing their own defined benefit plans.