Philips Electronics North America Corp., New York, is purchasing group annuity contracts from American United Life Insurance Co., Banner Life Insurance Co. and Prudential Life Insurance Co. of America to transfer U.S. pension fund liabilities of about 17,000 retirees, beneficiaries and terminated vested participants who have yet to retire.
The company also plans to contribute about $315 million to its U.S. pension fund in the fourth quarter, of which about $125 million will be made “to support the transaction,” according to a news release from parent company Royal Philips, Amsterdam. The remainder will be used in the first quarter of 2016 to “support the retained U.S. liabilities.”
The transaction, which is expected to close in December, will reduce the company's U.S. pension fund obligation by about €1 billion ($1.1 billion), leaving about €2.7 billion in U.S. plan obligations remaining, the news release said.
“This transaction involves a large group of retirees and terminated vested former employees who worked for Philips' companies or business units that are no longer within Philips' current business structure. The majority of them (are) already receiving a benefit, and a relatively small group has yet to start their benefit,” spokesman Steve Klink said in an e-mail. Mr. Klink would not provide further information.
The company's U.S. pension fund had $3.1 billion in assets as of Sept. 30, 2014, according to a Pensions & Investments estimate.
Banner Life Insurance Co. is the primary U.S. insurance subsidiary of Legal & General America.
Independent fiduciary State Street Global Advisors assisted.