General Motors Pension Lump Sum Calculator

General Motors Pension: What You Need to Know

Plan status: Frozen

GM's U.S. salaried pension covers employees hired before January 2001, and its accruals stopped September 30, 2012. Salaried benefits are based on years of service and pay history. Hourly employees hired before October 15, 2007 are in plans that pay stated amounts per year of service, with supplements for those who retire with 30 years before normal retirement age. Hourly employees hired after that date are in a defined contribution plan.

Buyouts and annuity transfers

In June 2012 GM offered a voluntary lump sum to about 42,000 salaried retirees and surviving beneficiaries and agreed to buy a group annuity from Prudential for most other salaried retirees, for an expected $26 billion cut in the salaried obligation. GM paid $3.6 billion in lump sums to 12,500 participants in August 2012 and a $25.1 billion annuity premium in November and December 2012. Prudential began paying those retirees in January 2013. GM said salaried employees remaining in the plan could choose a lump sum or monthly pension at retirement. In the fourth quarter of 2024 GM completed a $699 million annuity purchase for U.S. salaried retirees. The 10-K doesn't name the insurer.

Understanding your lump sum offer

A plan doesn't have to offer a lump sum. If it does, IRC 417(e) sets the least it can pay: the present value of your annuity using the IRS segment rates and mortality table. A cash balance plan usually quotes your account balance instead.

Comparing an offer to the 417(e) number tells you whether the plan is paying at least the legal minimum. It doesn't tell you whether the lump sum is a good deal for you. That depends on your health, your other income, your spouse, and what you'd do with the money. If an offer comes in well below this calculator, ask the plan which month of rates and which start age it used.

The November 2025 segment rates are 4.07% for payments under 5 years away, 5.15% for 5 to 20 years, and 6.01% beyond 20. Many calendar-year plans use them for 2026. Your election packet lists the rates your plan actually used.

Tax considerations

The lump sum is taxable in the year you receive it unless you roll it directly to a traditional IRA or your new employer's 401(k). A direct rollover (plan to IRA) is not a taxable event. Taking the cash is. If you take cash, the plan is required to withhold 20% for federal taxes, and you'll owe the remaining taxes when you file.

A $400,000 lump sum taken as cash has $80,000 withheld, but the whole $400,000 is ordinary income that year. The withholding may not cover the bill. A direct rollover defers the tax until you take money out.

When the lump sum makes sense

For General Motors retirees specifically, the lump sum can make sense when: you have serious health concerns and don't expect to reach the break-even age, you have other guaranteed income sources (Social Security, spouse's pension) that cover your baseline expenses, or you're comfortable managing a large portfolio for the rest of your life.

The annuity is typically the right answer for people who don't have other guaranteed income, whose spouse is younger and may outlive them significantly, or who simply don't want to manage a large portfolio in retirement. The guaranteed payment doesn't fluctuate with markets. It shows up every month regardless of what the S&P did.

Sources

• GM press release, June 1, 2012 (8-K Ex. 99.1)
• GM FY2012 10-K
• GM FY2025 10-K