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Sears secures annuity buyout with MetLife covering $515 million in pension liabilities

Sears Holdings Corp., Hoffman Estates, Ill., purchased a group annuity contract from MetLife to transfer about $515 million in U.S. defined benefit plan liabilities, the company announced in a news release Tuesday.

Under the agreement, made on May 15, MetLife will pay future pension benefits to about 51,000 retirees. The company said in the news release the transaction will “serve to reduce the size of the company's combined pension plan, future cost volatility and plan administrative expenses” but will have an “immaterial impact” on the plan’s funded status.

Howard Riefs, company spokesman, said in an email that in general, the population affected is retirees who began accruing benefits on or before Dec. 1, 2016, and have a monthly gross benefit of less than $150 in Sears Holdings Pension Plan 2. He added that Sears expects MetLife to begin making monthly payments on Aug. 1.

In the company’s most recent 10-K filing with the Securities and Exchange Commission in March, it disclosed it planned to contribute $312 million to its U.S. defined benefit plan in 2017; Sears Holdings contributed $314 million to the plan in 2016 and $299 million in 2015.

As of Jan. 28, U.S. defined benefit plan assets totaled $3.567 billion, while projected benefit obligations totaled $5.165 billion, for a funding ratio of 69.1%, up from 60.5% the prior year, according to that 10-K filing.

The actual asset allocation of the plan as of that same date was 63% fixed income and other debt securities, 35% equity securities and 2% other.