DETROIT—General Motors Corp. will eliminate health care coverage for salaried retirees age 65 and older and defer $1.7 billion in contributions going to a special trust to pay for health care coverage for retired United Auto Workers union members, the company announced Tuesday.

The financially ailing automaker’s decision to eliminate health care coverage for its age 65 and older retired salaried employees will go into effect Jan. 1, 2009. Detroit-based GM said, though, it will boost pension benefits to partially offset the new health insurance costs retirees will face.

Additionally, the $1.7 billion in contributions to help fund the voluntary employees’ beneficiary association that were due over the balance of 2008 and in 2009 will be deferred until 2010, GM said.

That VEBA is a critical part of a contract reached last year between GM and the UAW. Under the terms of agreement, GM will stop providing health care coverage for retired UAW members effective Jan. 1, 2010, but it will contribute roughly $29 billion in cash and notes to the VEBA.

GM’s actions on health care are part of a broad plan to improve its liquidity by $15 billion as it struggles amid a sharp downturn for its products in the U.S. market.