Facing increased PBGC variable premiums and potential corporate tax reform, U.S. corporations are accelerating their pension contribution schedules.
At least four companies have announced significant debt issuances in recent months, the proceeds of which are being used, at least in part, to make hefty pension contributions in 2017, surpassing the original expected contributions that had been announced in 10-K filings with the Securities and Exchange Commission.
The largest contribution was made by Verizon Communications Inc., New York, which in the first quarter made $3.4 billion in discretionary pension contributions. The contribution was funded by debt, a portion of an $11 billion offering in March that also funded the Yahoo Inc. acquisition, said Robert A. Varettoni, company spokesman, in an April 20 email.
Verizon, in its 10-K filing in February, originally said it intended to make its minimum-required contribution of $600 million during the year; the additional discretionary contribution brings the total for the year to $4 billion.
As of Dec. 31, defined benefit plan assets totaled $14.6 billion, while projected benefit obligations totaled $21 billion, for a funding ratio of 69.3%, according to the company's 10-K.
Other companies that have recently issued debt in order to fund larger-than-expected discretionary contributions are:
- E.I. du Pont de Nemours & Co., Wilmington, Del., announced in a May 2 SEC filing that it plans to contribute $2.9 billion to its U.S. defined benefit plan in 2017, partially funded by new bonds totaling $2 billion. The company in its 10-K filing in February originally said it intended to make $320 million in contributions in 2017.
- FedEx Corp., Memphis, Tenn., offered $1.2 billion in new bonds at the beginning of 2017, $1 billion of which was set to be used to fund pension contributions. The company's fiscal year began on June 1.
- Delta Air Lines Inc., Atlanta, contributed a total of $3.2 billion to its defined benefit plans in March and April, it said in an April 12 SEC filing. The amount was well above the $1.2 billion the company had announced in its 10-K filing on Feb. 13. The funding of the larger contribution came from $2 billion in unsecured, investment-grade debt the company issued during the first quarter.