Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Sears Holdings Corp., in an effort to unload some of the risk of its underfunded pension plan, entered into an agreement with Metropolitan Life Insurance Co. to annuitize $515 million of Sears’ pension liability.
Under the agreement announced May 23, MetLife will pay future pension benefits to approximately 51,000 retirees. The action is expected to have an “immaterial impact on the funded status” of the retailer’s pension obligations, but it will serve to reduce the size of the company’s pension plan, future cost volatility, and administrative expenses, Sears said.
As of March, Sears’ pension plan had $3.57 billion in assets and its pension obligations were $5.17 billion, according to the company’s latest financial filings. The plan is 69 percent funded.
In recent years, Sears has been active in making cash contributions to its pension plan. Since fiscal year 2013, Sears has contributed more than $1.5 billion to the plan, according to company data on the Bloomberg Terminal.
In efforts to increase profits, Sears and other major retailers, including Macy’s Inc. and J.C. Penney Co., have announced store closures, layoffs, and early retirement packages. In 2015, J.C. Penney reached an agreement with Prudential Insurance Co. of America to transfer more than $1.5 billion in assets to settle a portion of its pension liabilities. Earlier this year, J.C. Penney offered a voluntary early retirement program to 6,000 full-time employees.
One of the trends in 2016 was for major employers to de-risk their pension plans by purchasing annuity contract groups, according to a recent study by pension consultant Milliman.
In June, MetLife, along with Mass Mutual Life Insurance Co., agreed to take on $1.6 billion in pension liabilities from Pittsburgh-based PPG Industries Inc.
Other major companies that have engaged in similar transactions include WestRock ($2.5 billion), United Technologies ($1.6 billion), Hewlett Packard ($1.3 billion), Verizon ($1.3 billion), International Paper ($1.2 billion), and Pepsi ($1 billion).
To contact the reporter on this story: Carmen Castro-Pagan in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)