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Last year, General Electric Co. (NYSE: GE) posted third-quarter free cash flow of negative $3.35 billion, about $5 billion of which reflected a contribution to the company’s pension funding. In the first six months of this year, the negative cash flow totaled $800 million.

The company said this morning that in an effort to improve its financial condition, GE will prefund $4 billion to $5 billion in estimated pension funding requirements for 2021 and 2022 at the same time as it freezes its pension plan for about 20,000 employees with salaried benefits and another 700 or so executives with supplementary pension benefits. GE also will offer a lump-sum payment to about 100,000 eligible former employees who have not yet begun to receive monthly pension payments. The company’s pension plan has been closed to new members since January 2012.

The company noted that GE retirees already receiving pension or production benefits are unaffected by the announced changes.

GE said that these actions are expected to reduce the company’s pension benefit by about $5 billion to $8 billion and its Industrial group net debt by approximately $4 billion to $6 billion. The company expects to fund $4 billion to $5 billion of its minimum ERISA obligations for 2021 and 2011 from the $38 billion GE has raked in from its BioPharma, Baker Hughes and Wabtec transactions. ERISA is the Employee Retirement Income Security Act of 1974 that governs U.S. pension funds.

Pension plan participants who take advantage of the lump sum offer are expected to receive the distribution in December. GE will not use any of its cash to fund the lump-sum payments, instead, using assets from the company’s pension trust. Following the lump-sum payouts, GE said it expects to record a noncash pension settlement charge in the fourth quarter. The amount of the charge will depend on the rate of acceptance of the lump-sum offer.

Kevin Cox, chief human resources officer at GE said:

Returning GE to a position of strength has required us to make several difficult decisions, and today’s decision to freeze the pension is no exception. We carefully weighed market trends and our strategic priority to improve our financial position with the impact to our employees. We are committed to helping our employees through this transition.

According to an April report from Barron’s, GE’s pension obligations total $92 billion of which $62 billion is governed by ERISA rules. Those ERISA obligations are 80% funded. Last year, GE $6 billion to its pension funding to cover 2019 and 2020 ERISA requirements.

As of Friday’s close, the company’s market cap was just under $75 billion.

The impact of these changes will contribute to GE’s progress toward a goal of reducing its leverage to less than 2.5 times net debt-to-EBITDA by the end of next year.

Later this month, GE will report third-quarter results. Analysts are expecting earnings per share of $0.12 on revenues of $28.95 billion. For the second quarter, GE reported EPS of $0.17 and revenues of $28.83 billion.

GE’s stock traded down about 0.6% early Monday, at $8.51 in a 52-week range of $6.40 to $13.25. The consensus 12-month price target is $10.61.