Corporate pension plan sponsors are continuing to shed liabilities through lump-sum offers and group annuity purchases from insurers, leading some consultants to predict an eventful fourth quarter.
“From an economic perspective, looking at the landscape I also think it supports potentially being a busy fourth quarter. Interest rates are about level with where they were this time last year. I think the mindset of companies continues to be very interested in risk transfer,” said Tim Geddes, Detroit-based director at Deloitte Consulting, in a telephone interview.
In the past month alone, a handful of companies announced significant moves to further reduce risk in their pension plans.
- J.C. Penney Co., Plano, Texas, which already offered a lump-sum window in 2012 to former employees who had yet to retire, made an additional offer to retirees; and Newell Rubbermaid Inc., Atlanta, announced its second such offer in as many years to former employees who had yet to retire.
- Lincoln Electric Co., Cleveland, announced Aug. 19 it purchased a group annuity contract from Principal Financial Group to settle about $425 million in outstanding U.S. pension liabilities for 1,900 U.S. retirees and beneficiaries who retired on or before June 1. A Lincoln Electric spokeswoman said in an e-mail the company's U.S. Retirement Annuity Program had about $900 million in assets, and a funding ratio of 106%.
- West Pharmaceutical Services Inc., Exton, Pa., announced Sept. 10 it purchased a group annuity contract from MetLife to settle about $140 million in pension liabilities. As of Dec. 31, its pension fund assets totaled $322.3 million, while projected benefit obligations totaled $398.5 million, for a funding ratio of 80.9%, according to the company's most recent 10-K filing.
Neither company would comment on the premium paid.