The buyout offer applies to 42,000 white-collar GM retirees who have stopped working for the company between October 1, 1997, and December 1, 2011.
They have until July 20,2012, to decide if they want to take a lump sum payment rather than receiving monthly payments.
The payment would be received by September 2012 and the amount would be determined by IRS standards.
For the rest of the retirees, GM will buy a group annuity from Prudential Insurance Company of America, with payments starting in 2013.
GM officials say the offer is good for retirees and the company.
GM chief financial officer Dan Ammann says, "Ultimately, these actions provide the U.S. salaried retirees increased flexibility, while maintaining a secure benefit throughout their retirement and GM is able to reduce its retirement obligation by approximately $26-billion."
GM admits to having an under-funded pension plan. It says at the end of last year, U.S. salaried plans were $13-billion short.
"We have a very significant obligation on the books, and while there is $100-billion of funding set aside for this, we feel it's important to mitigate the future growth of these obligations as we've been doing to date and in the case of today's actions, actually reduce the obligation and bring it to a more normalized level relative to the size of our business and to our market share," says Ammann.
The changes will impact around 118,000 white-collar retirees.
Wall Street liked the announcement. GM's stock jumped 3% after the release of the news.
This will not impact union pensions.
When asked about hourly workers' pensions, the company says it maintains ongoing discussions.