NCR Corp., Duluth, Ga., will offer a voluntary lump-sum payment option to deferred vested participants in its frozen $2.7 billion U.S. defined benefit pension plan.
The action is part of what the company calls phase two of its pension strategy and affects about 23,000 participants, said William Nuti, chairman, president and CEO, in a conference call on Tuesday.
Also, as part of phase two, the company expects to contribute at least $500 million to the plan in 2012 but doesn't expect to make another contribution to the U.S. plan until 2018.
“In April 2010 we announced phase one — and that was to move at the time to 100% fixed income at the end of 2012 — and we will be completed with that in a couple of months,” Mr. Nuti said on the conference call.
Letters offering the payment option will be sent to eligible participants on Aug. 31 with a deadline of Oct. 31 to make a decision. Payouts are expected to be completed by the end of the year.
“We're expecting a take-rate assumption here of around 70% … and that's baked into the model,” said Mr. Nuti.
He also mentioned there is a high likelihood the company will move to mark-to-market accounting for its U.S. plan in 2013.
As of Dec. 31, 2011, the U.S. defined benefit plan, which was frozen at the end of 2006, had a fair value of plan assets of $2.733 billion and projected benefit obligations of $4.027 billion, for a funding ratio of 67.9%. The company contributed $9 million to the plan in 2011.
“There will be a phase three and perhaps even a phase four to our pension strategy,” Mr. Nuti said. “We are very focused on eliminating pension entirely and from the point of view of not being in the pension business, if you will, going forward. We are already working as a team toward the next steps of this strategy, which will likely unfold next year.”
