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J.C. Penney makes lump-sum offer to retirees, eyes possible annuitization

J.C. Penney Co., Plano, Texas, is offering about 31,000 retirees and beneficiaries a lump-sum window, the company announced in a 10-Q filing with the Securities and Exchange Commission on Tuesday.

The offer, which expires Sept. 18, has been made to those participants who began receiving benefits between Jan. 1, 2000, and Aug. 31, 2012. The company has also made an offer with 8,000 terminated vested participants who have yet to retire.

This is the second lump-sum offer window provided by J.C. Penney. The company previously made an offer in the fall of 2012 to about 35,000 former vested employees who had yet to retire as of that date.

About 25,000 of those participants elected to take the lump sum, and the company made a total of $439 million in payments in December 2012.

Joey Thomas, company spokesman, said in an e-mail that the current offer to the 8,000 terminated vested participants includes participants previously given that offer.

It may not be the end of the company's pension risk transfer efforts. “The company has been on a path to derisk the pension plan, which takes into consideration a number of risk reduction strategies, including liability-driving investing, lump-sum windows and annuitization,” said Mr. Thomas. “We monitor the annuitization market on an ongoing basis to evaluate if there are opportunities to further derisk the pension plan in a cost-efficient manner.”

Regarding the offer to retirees, which the IRS banned when it released Notice 2015-49 on July 9, Mr. Thomas said the company satisfied one of the exceptions allowed prior to that date.

As of Dec. 31, J.C. Penney's primary pension fund had $5.5 billion in assets, and a projected benefit obligation of $5.3 billion, for a funding ratio of 104%.