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Pension Risk Transfer

Avery Dennison transfers $750 million in U.S. pension liabilities

Deal with American General Life completes termination of U.S. plan

Avery Dennison Corp., Glendale, Calif., purchased a group annuity contract from American General Life Insurance Co. to transfer $750 million in U.S. defined benefit plan liabilities, according to an 8-K filing with the SEC on Wednesday.

The agreement with the AIG division on March 21 completed the process of terminating the company's U.S. pension plan. American General Life Insurance began assuming the benefit payments of about 8,500 retirees, beneficiaries, active and former employees on April 1.

The company's board of directors in July had approved the termination of the Avery Dennison Pension Plan, as well as a $200 million contribution to the plan before Aug. 15 to enable a deduction on its 2017 U.S. income tax return. According to a July 11 8-K filing, the pension plan was about $240 million underfunded at the time.

In that July filing, the company said it would "settle a long-term liability currently estimated to be approximately $950 million (calculated on a plan termination basis) through a combination of (i) lump-sum payments in 2018 to eligible participants who elect to receive them and (ii) the purchase of a group annuity contract with one or more highly rated insurance companies in the first half of 2019." The company made about $152 million in lump-sum payments in the fourth quarter of 2018, according to its most recent 10-K filing.

As of Dec. 31, U.S. DB plan assets totaled $736 million, while projected benefit obligations totaled $869 million, for a funding ratio of 84.7%, according to the 10-K filing. As of that same date, non-U.S. DB plan assets totaled $632 million, while projected benefit obligations totaled $697 million, for a funding ratio of 90.7%.

Rob Six, Avery Dennison spokesman, referred questions to prior filings.