PepsiCo discloses annuity buyout in 2016; plans $130 million contribution to DB plans in 2017

PepsiCo Inc., Purchase, N.Y., purchased a group annuity contract in 2016 from an insurance company to transfer defined benefit plan liabilities, the company announced in its 10-K filing on Wednesday.

The company did not name the insurance company or the population of retirees whose benefits will now be paid by the unnamed insurance company. The company did say it made discretionary contributions to its U.S. plans totaling $452 million in 2016 primarily to fund the transaction.

PepsiCo contributed a total of $541 million to the U.S. plans and $118 million to the non-U.S. plans in 2016.

Also, in the 10-K filing, PepsiCo said it plans to make a total of $130 million in contributions to its defined benefit plans in 2017. The company did not specify how the contributions would break down between U.S. and non-U.S. plans.

As of Dec. 31, U.S. defined benefit plan assets totaled $11.46 billion, while projected benefit obligations totaled $13.19 billion, for a funding ratio of 86.9%, down slightly from 87.4% the year before, according to the 10-K filing.

Also as of Dec. 31, non-U.S. defined benefit plan assets totaled $2.89 billion, while those projected benefit obligations totaled $3.12 billion, for a funding ratio of 92.6%. The previous year, the funding ratio was 98.3%.

For the U.S. plans, the discount rate dropped to 4.5% as of Dec. 31 from 4.6% the year before, while the discount rate for the non-U.S. plans dropped to 3.1% from 4% the year before.

As of Dec. 31, the actual allocation of the U.S. plans was 40% fixed income, 33% domestic equity, 22% international equity and 5% real estate.

Officials at PepsiCo could not be immediately reached to provide further information.