For retirees, GE no longer pays the bills
Cuts to dividend hit corporation’s former employees hard
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.