Ford Motor Co., Dearborn, Mich., will offer a voluntary lump-sum defined benefit plan payment to about 90,000 U.S. salaried retirees and former employees, apparently a first among large U.S. plans.
Company executives billed the lump-sum offer, announced on April 27, as the latest move in their long-term strategy to reduce risk in Ford's $39.4 billion U.S. pension plans.
The Ford executives didn't explain the timing, but observers said they believe Ford is making the offer now because it will cost less than in the past. Under a provision of the Pension Protection Act, new corporate bond rates were recently phased in, replacing 30-year Treasuries.
Robert L. Shanks, executive vice president and CFO, said during Ford's quarterly earnings conference call with analysts that he wouldn't provide details on the assumptions or discount rate.
“We have assumptions, obviously, but we prefer not to share them now because we don't know how good they are,” Mr. Shanks said, according to a transcript of the call provided by Bloomberg.
Nor would he say by how much the payout would cut Ford's pension obligation. “Because of the voluntary and unprecedented nature of this program, the participating level and therefore the impact on our future pension obligations is difficult to predict,” Mr. Shanks said.
“Individual offers will be made over time to accommodate the size and complexity of this program, and we would expect to complete the process some time next year,” he said.
The lump sums will be funded from plan assets, he said, and planned contributions will not be affected.
“This is a really significant step for us because it's really important that we improve the risk profile of the company,” Mr. Shanks said.
Ford's action appears to be unprecedented for a large U.S. pension plan.
“I'm not aware of anyone who has done this without terminating or annuitizing their plan,” said Jeremy Gold, president of Jeremy Gold Pensions, New York, an actuarial consulting firm.
“All your lump summing for employees is part of that (kind of) event, but ... I'm not aware of this being done on an optional basis,” he said.
“It could stimulate copycats, so I would think we might see a fair amount of this, particularly from companies whose pension plans are liquid enough or whose capability to fund their plan is not under great stress.”