Money managers for Eastman Kodak Co. Inc.'s $7.5 billion pension fund might lose up to 5% of the assets they oversee, the result of 10,000 worldwide job cuts announced by Kodak earlier this month.
At U S WEST Inc., meanwhile, the number of employees staying there or moving to newly created MediaOne Inc. will determine the division of the assets and liabilities of U S WEST's $11 billion defined benefit plan.
Kodak's cut, the largest by any U.S.-based company this year, won't translate into money manager terminations.
Kodak's overfunded U.S. pension fund is well prepared to pay sooner-than-expected pension liabilities that will result from the job cuts, said Robert Spooner, manager of pension investments.
The fund has sufficient cash, and the investment staff periodically rebalances the pension fund back to its asset targets by selling assets to make benefit payments, according to Mr. Spooner.
"I suspect it will be (funded with) an across-the-board liquidation of a little bit of assets from all managers," said Mr. Spooner.
"We don't know the percentage (taken from each manager) until we know the timing of when it will occur," said Mr. Spooner. "What hasn't been made clear is exactly the timing of the cuts and what is inside or outside the United States."
"Hopefully, that (job cuts) will be clearer by year end," he said. "At this point, it is undefined."
According to Mr. Spooner, Eastman Kodak's benefit payments have averaged about $600 million annually for the past several years. The pension fund is overfunded on both an accrued benefit obligation and projected benefit obligation basis, he said.
"When we make benefit payouts in coming and prior periods, we raise cash by selling assets that have exceeded targets," said Mr. Spooner. "So it (increased payout) is not a problem.
"We may do a little bit more (as a result of job cuts), but it is not an unusual feature for us to do this," he said.
The Eastman Kodak pension fund is close to its targets, so Mr. Spooner thinks the increased payments will result in a 5% or less reduction of assets from money managers.
He noted his fund covers only U.S. workers, and the cuts are supposed to be worldwide. About 60% of the employees are in the United States.
Mr. Spooner said he didn't know the size of the foreign pension funds, but to the best of his knowledge, those funds are overfunded.
In the U S WEST spinoff, U S WEST Communications Group will be known as U S WEST Inc. and will include the telephone, data and wireless operations of the current company and the vast majority (approximately 54,000) of its employee base of 69,000.
U S WEST Media Group will be renamed MediaOne Group Inc., and will include the company's cable distribution system, its interests in Time Warner Entertainment, and all of U S WEST's international interests and interactive services.
Decisions about U S WEST's pension fund are not finalized, according to pension fund officials. But, they said, the pension approach could be similar to AT&T Corp.'s when it split into three companies in 1996. The means U S WEST probably would continue to oversee the pension assets of the new company, at least on an interim basis.
Don Butt, manager of investments responsible for U S WEST's $4 billion 401(k) plan, said officials are considering how the employee benefit plans will be handled.
"As soon as we know how many employees are going (to MediaOne) we would expect to set up a new (defined contribution) plan, which would mirror the current plan," said Mr. Butt.
"No decisions have been made yet, the senior management team has not yet signed off on these kinds of issues yet," said a U S WEST spokesman.
