Insurance News

GM Making Cuts to Life Insurance, Health Care

Posted on: March 5, 2009

General Motors will reduce life insurance benefits for most of its white-collar retirees and cut back on company-provided health care for some salaried workers under 65, according to the Detroit Free Press.

GM has already eliminated coverage for retirees older than 65 because they are eligible for government benefits. That change went into effect this year.

This new cost cutting move comes along with Tuesday’s announcement that the company will cut its worldwide salaried workforce by 10,000 people, and reduce US white-collar workers’ base pay by as much as 10%.

The cuts to company-provided health care coverage apply to retired salaried workers who are younger than 65 and eligible for Medicare. A company spokesperson says it will only affect several hundred employees company wide.

Retirees losing their health care benefits will be given a $260 per month medical expense credit that can be used to pay for qualified health care expenses, like monthly premiums, deductibles and co-pays. The change goes into effect January 1, 2010.

Salaried retirees younger than 65 who were hired before 1993 will still be provided health care by the company. Employees hired after that do not receive company-provided health care once they retire.

General Motors is also telling salaried employees, hired before January 1, 1993, that their basic life insurance benefits will be reduced when the retire. That change will impact most of the company’s 114,000 retired salaried workers.

Active salaried employees will continue to receive their basic life insurance policy, which is worth two times their annual salary. Once they retire, GM is reducing the benefit from 100% of annual base salary to 75% for select people during the first 10 years of retirement. The benefit will also drop from 50% to 25% after 10 years. However, the benefit will not drop below $25,000.

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