Presentation on theme: "Impact of a GM Bankruptcy GMSSPP or GMPSP 401(K) Promark Income Fund Pension Plan Pension Benefit Guarantee Corporation Can I rollover all or part of my."— Presentation transcript:
Impact of a GM Bankruptcy GMSSPP or GMPSP 401(K) Promark Income Fund Pension Plan Pension Benefit Guarantee Corporation Can I rollover all or part of my pension plan and 401(K) to an IRA? What can I do with after tax assets in my 401(K) How can I access assets from my 401(K) or IRA penalty free before age 59 ½ Defensive actions to consider
GMSSPP or GMPSP 401(k) Amounts invested in a 401(k) plan by a participant constitute assets of the 401(k) retirement plan and are held in trust for the benefit of the participant. These investment assets do NOT belong to the plan sponsor and are segregated and separate from the plan sponsor’s assets. Under current law, participants’ assets are NOT at risk of being determined to be property of a General Motors bankruptcy estate.
Promark Income Fund What is Promark Income Fund? –A bank maintained collective investment fund managed by General Motors Trust Bank with a stable value investment strategy. GMTB is an indirect wholly owned subsidiary of General Motors and a GM Bankruptcy should not affect GMTB’s ability to serve as manager of the fund. –The fund invests in investment grade and non-investment grade fixed income securities (9/08) 35.6% Corporate, 25.8% Mortgage Backed, 20.5% Government, 11.5% High Yield, 5.7% Short term – Insured by wrap contracts issued by several highly rated insurance companies. (AA by S&P) Aegon, ING, Pacific Life –For more information refer to GM PSP and GM SSPP Prospectus
Pension Plan Will bankruptcy affect my pension? –Much more complex than 401(k) issue –It is possible that GM Bankruptcy will have no current affect of on the pension plan. –Pension plan could continue to operate through bankruptcy proceedings and could continue to be an obligation of a post-bankruptcy GM. –In some cases, bankrupt companies do choose to terminate their pension plans as part of their reorganization.
Pension Plan Funding Funding of Pension Plan according to GM filing with the SEC on 2/18/09 –Combined U.S. pension assets dropped to $84.2 billion on 12/31/08 compared to $104.1 billion at end of 2007. Funding levels dropped from 124% to 87%. Market correction (GM pension 26% equities) Early Retirement Buy outs –Hourly pension now $55.5 billion and 83% funded –Salaried pension now $28.7 billion and 95% funded –May have to seek additional financial support in 2013 and 2014 if funding conditions don’t improve
Pension Plan Termination of Pension Plans –Terminated plans don’t necessarily mean terminated benefits for participants. –Many current retirees and near retirees may see no changes in their benefits IF GM did terminate their pension plan. –Termination of the plan means turning over its operation to the Pension Benefit Guaranty Corporation (PBGC)
Pension Benefit Guaranty Corp. Created by Employee Retirement Income Security Act (ERISA) of 1974. Protects the retirement income of 44.1 million American workers in 30,330 private sector defined benefit pension plans. PBGS is NOT funded by general tax revenues. PBGC collects insurance premiums from employers, earns money from investments, and receives funds from pension plans it takes over.
Pension Benefit Guaranty Corp. If your plan ends without sufficient money to pay all benefits, PBGC will pay you the benefit provided by your plan up to the limits provided by law. Now pays monthly retirement benefits to about 683,000 retirees in 3,595 pension plans that ended. The maximum pension benefit guaranteed by PBGC is set by law and adjusted yearly. For plans ended in 2009, workers who retire at age 65 can receive up to $4,500 per month ($54,000 yr.) Single life annuity or $4,050 per month ($48,600 yr.) Joint and 50% Survivor Annuity. The guarantee is lower for those who retire early. The guarantee increase for those who retire after age 65. For additional information- www.pbgc.gov
Pension Benefit Guaranty Corp. Maximum Monthly Guarantees for 2009 AGE Single Life Joint/50% Survivor 65$4,500$4,050 64$4,185$3,767 63$3,870$3,483 62$3,555$3,200 61$3,240$2,916 60$2,925$2,633 59$2,745$2,471 58$2,565$2,309 57$2,385$2,147 56$2,205$1,985 55$2,025$1,823 54$1,935$1,741 53$1,845$1,661 52$1,755$1,580 51$1,665$1,499 50$1,575$1,418
Pension Benefit Guaranty Corp. In a recent interview, the acting director of the PBGC Vince Snowbarger noted that GM is not expected to terminate its pension plan in bankruptcy. Uncertainties of bankruptcy makes the issue of pension plan termination a very volatile and fluid situation.
Can I rollover all or part of my pension plan and 401(K) to an IRA? Pension Plan –Active Salaried Employees Your Part B contributions only Will reduce monthly benefit –Employees who have severed service Order pension projection for: –Single life annuity and 65% survivor benefit –Lump sum option –Pension Protection Act and IRS regulations impose restrictions on accelerated payments (Lump Sum Distributions) when funding levels fall below 80%. As of 12/31/08 GM Hourly pension funding level was 83% and Salaried pension plan was 95% funded. Delphi pension no longer allows lump sum distributions
What can I do with after tax assets in my 401(K) Available penalty and income tax free for emergency cash reserves. Rollover to tax free Roth IRA in 2010.
How can I access assets from my 401(K) or IRA penalty free before age 59 1/2 401(k) Age 55 Rule IRA 72 (t) Rule
Defensive actions to consider Build up emergency cash reserves in FDIC insured money mkt, savings, or CD’s. Pay down short term debt. Review your current mortgage rate and if appropriate, refinance to new lower rate 30 yr. fixed mortgage. Rebalance 401(K) and other investments to more moderate allocation. Update your retirement plan –Review current holdings to assess age 55 rule, 72(t), and after tax assets. –Pension alternatives
Actions to Consider Update your financial plan to adjust for: –Lower pension benefits –Higher health care cost –Higher taxes –Longer life expectancy Increase retirement savings –401(k) & new Roth 401(k) –IRA’s and Roth IRA’s –Tax Deferred Variable Annuities with living and death benefits –Separately Managed Accounts –REIT’s Delay retirement or work part time for a few years
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