For re­tirees, GE no longer pays the bills

Cuts to div­i­dend hit cor­po­ra­tion’s former em­ploy­ees hard

Stamford Advocate (Sunday) - - Sunday Business - By Jor­dan Grice

For thou­sands of peo­ple who spent decades work­ing at and in­vest­ing in Gen­eral Elec­tric, the fi­nan­cial de­pend­abil­ity they were promised for their re­tire­ment years is grad­u­ally be­ing dis­man­tled.

That harsh truth was made even clearer in Oc­to­ber, when the com­pany an­nounced that it would drop its quar­terly div­i­dends to a penny per share next year, cut­ting a cru­cial source of in­come for thou­sands of peo­ple, in­clud­ing many GE re­tirees in south­west­ern Con­necti­cut.

“A lot of our peo­ple, our re­tirees and de­pen­dents are hurt­ing,” said John Phelps, who worked more than 40 years at GE’s plant in Water­ford, N.Y., which was sold in 2006.

Now, Phelps leads an ad­vo­cacy group for his fel­low re­tirees amid the grow­ing prob­lems that have de­vel­oped fol­low­ing the global con­glom­er­ate’s de­par­ture from its Fair­field head­quar­ters for Bos­ton in 2016.

Among those is GE’s 2015 move to cut sup­ple­men­tal health care plans for re­tirees and in­stead of­fer ac­cess to a pri­vate ex­change of in­sur­ance providers and a $1,000 an­nual re­im­burse­ment to cover ex­penses.

That move was the fo­cus of a num­ber of law­suits against the com­pany in re­cent years, none of which proved suc­cess­ful. Now, re­tirees are again fac­ing trou­ble with new cuts to their in­come.

Long-term se­cu­rity

For decades, em­ploy­ees were trained to rec­og­nize GE not only for its global ap­peal, but also its fi­nan­cial se­cu­rity dur­ing and af­ter their ca­reers.

Often re­ferred to as the “three-legged stool,” Phelps said em­ploy­ees had long be­lieved their 401(k)s, health care and pen­sions with GE would

keep them fi­nan­cially se­cure, but many are find­ing that’s no longer the case.

“‘If you have those you’re all set, don’t worry’ — that’s what GE used to tell you,” he said. “Well, it’s all crashed. We got a lot to worry about.”

At the end of his ten­ure with GE, Phelps said his 401(k) had roughly $250,000, but fol­low­ing the stock mar­ket dive in 2009, he said the amount was halved. Cut­ting the div­i­dend nearly to noth­ing has a ma­jor im­pact on his in­come.

“All of us re­tirees ab­so­lutely feel we earned these ben­e­fits, af­ter years of ser­vice, com­mit­ment and ded­i­ca­tion to GE — most of us for over half our lives — and for GE to start tak­ing these ben­e­fits away, af­ter we have al­ready re­tired, we feel very be­trayed by and an­gry at GE, and we feel GE broke its prom­ises to us,” Phelps said.

Cut­ting deep

Even for re­tirees whose qual­ity of life has gone rel­a­tively un­scathed, the div­i­dend de­ci­sion has dealt a blow to their port­fo­lios.

“There’s 400,000-plus re­tirees and their net worth has

prob­a­bly dropped to half in just the last three years alone,” said John MacMona­gle, who re­tired from GE in 2013 af­ter a 33-year ca­reer.

For a time, he served on Fair­field’s eco­nomic de­vel­op­ment com­mis­sion be­fore mov­ing to New Hamp­shire.

Though the value of his as­set hold­ings took a hit, he said he un­der­stood the need for the com­pany to try to re­cover from past mis­takes. Cut­ting the div­i­dend, he said, is a re­sult of the stock plum­met­ing in the past year, and it pro­vides the com­pany with some breath­ing room to be able to get through its fi­nan­cial woes.

“Share­hold­ers are be­ing hurt by the cut,” he said. “How­ever, had the div­i­dend stayed in place, the com­pany’s in­abil­ity to meet its debt obli­ga­tions would have af­fected sus­tain­abil­ity,” he said.

For re­tirees like Bryan Fisher, who di­ver­si­fied his port­fo­lio af­ter re­tir­ing in 2009 af­ter 39 years, the 2019 cuts won’t sting much, but he em­pathized with many of his col­leagues who will suf­fer.

“It leaves them with less in­come and dif­fer­ent qual­ity and stan­dard of liv­ing, for sure, but it’s no dif­fer­ent than when any other stock goes bad,” Fis­cher said.

Ed­ward Or­nelas / Al­bany Times Union

Union mem­bers and re­tirees take part in a protest out­side the gates of Gen­eral Elec­tric this year in Sch­enec­tady, N.Y. Re­tirees say that they are un­fairly see­ing ben­e­fits taken away year af­ter year by Gen­eral Elec­tric af­ter decades of work­ing for the com­pany.

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