General Motors ( GM) is getting serious about cutting expenses.

Retirees who were paid salaries will take a hit, as the Detroit-based automaker will cut health care benefits and reduce life-insurance coverage for some who are under 65, according to an internal document obtained by TheStreet.com. GM, which is straining under employee obligations and corporate debt, spent $103 billion to fund so-called legacy pensions and retiree health care costs from 1993 to 2007 alone.

GM, the largest U.S. carmaker, said Feb. 10 it plans to slash 10,000 salaried jobs and lower pay by as much as 10%.

The company will withdraw health care benefits for salaried retirees, surviving spouses and eligible dependents under age 65 who may receive Medicare. The changes take effect Jan. 1, 2010. Starting May 1, 2009, life-insurance coverage provided by GM at two times a worker's salary will be cut to 75% of the salary upon retirement. After 10 years, the rate will be reduced by an additional 25%. Current retirees also will be affected.

GM spokesman Tom Wilkinson said the company would establish a company-funded health reimbursement account, called an HRA. GM will make a $260 tax-free monthly contribution to an HRA for affected retirees or surviving spouses. When a retiree reaches age 65, an additional monthly pension payment of $300, announced last summer, will be paid.
Gavin Magor joined TheStreet.com Ratings in 2008, and is the senior analyst responsible for assigning financial strength ratings to health insurers and supporting other health care-related consumer products, including Medicare supplement insurance, long-term care insurance and elder care information. He conducts industry analysis in these areas. He has more than 20 years' international experience in credit risk management, commercial lending and analysis, working in the U.K., Sweden, Mexico, Brazil and the U.S. He holds a master's degree in business administration from The Open University in the U.K.

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