NEW YORK - ITT Corp. will establish new pension plans once it spins off its operations into three publicly owned companies, according to a company spokesman.
Then, each of the three companies will establish their own investment policies, asset allocations and money manager lineups.
ITT has 24 money managers. It also manages $855 million internally, all in indexed stocks and bonds.
The ITT manager lineup is likely to remain intact, at least until the three new businesses begin operating independently. After that, the spokesman said, there could be some changes as the plans' designs and asset allocations are reviewed and put into place.
"The planned separation will enable the management of each of these businesses to organize their capital structure and design corporate policies and strategies that are based primarily on the business characteristics of the respective companies and to concentrate its financial resources wholly on its own operations. Management will also be able to design incentive compensation programs that relate more directly to its own business characteristics and performance," Rand V. Araskog, ITT's chairman, president and chief executive, said in a prepared statement.
The current ITT plan, with $3.2 billion in assets, will become the plan of ITT Industries Inc., one of the three new companies.
The ITT Industries plan will contain most of the employees, beneficiaries and liabilities of the old ITT Corp., the ITT spokesman said, thus the assets of the current plan will remain with ITT Industries.
The asset management and asset allocation guidelines of ITT Industries and the other two ITT companies could undergo changes after they begin operating independently, he said. Staffing needs for each of the new companies has not been determined. Each company will determine staffing needs once they begin operating, and may designate a pension officer or "make (that position) part of the treasury function," he said.
According to a preliminary proxy statement, each plan will be amended to recognize all service rendered on or prior to the date of the spinoff.
The proxy said the $1.6 billion ITT savings plan also will be divided into three separate plans, with existing account balances to be transferred to employee accounts with their new employer.
In addition, an ITT source said the company's 6-year-old employee stock ownership plan has been terminated. The approximately 45,000 plan participants will receive distributions of nearly 1 million shares - or about $130 million worth - of ITT stock, after plan expenses are paid.
The source said the plan's normal five-year vesting schedule will be waived and all participants will receive full entitlements, regardless of vesting status.
Distributions of stock will be completed before the current ITT Corp. is split up.
Meanwhile, Eileen Leahy, manager-pensions at ITT, resigned to accept the No. 2 pension job at Bristol-Myers Squibb Co., New York.
The ITT spokesman said her departure was not related to the ITT restructuring. Ms. Leahy has been replaced by Paul Mastroianni, director of risk management, on an interim basis until a decision is made on pension staffing requirements in each of the three companies.
ITT officials expect the spinoffs to be complete by the end of 1995.
The three new companies are:
ITT Hartford, the current insurance business of ITT; ITT Industries, the automotive, defense, electronics and fluid technology business of ITT; and the new ITT Corp., made up of ITT Sheraton Corp., Caesers World Inc., ITT World Directories and ITT's interest in Madison Square Garden and in ITT Educational Services Inc.
Upon completion ITT Hartford will have about 20,000 employees and a pension fund with about $1.2 billion, the currents assets in the Hartford plan; ITT Industries about 58,000 employees with pension assets of about $3.2 billion; and the new ITT about 30,000 employees with a pension fund in the "hundreds of millions," of dollars, according to the ITT spokesman.
A separate pension plan for Sheraton employees will become part of the new ITT plan, he said.
Investment and benefits consultants compare the ITT restructuring to the AT&T Corp. divestiture that resulted in the creation of seven baby Bells - and seven new pension plans - in 1983.
Said one consultant, who asked to remain unidentified: "They will have to divide the (pension) liabilities and the assets as though on a termination basis. If the assets and liabilities are close, the split will be clean, and each company will go on and make its own decisions.
"For the current money manager lineup, it will be a whole new ball game. These managers were hired by the plan sponsor to manage assets of a specific plan. Each new plan will have different characteristics. The whole thing is probably up for grabs. Each plan will want its own asset mix and its own managers," the consultant said.
The ITT spokesman declined to speculate on how many of the current asset managers will be retained, noting each of the new firms will make its own decisions on how assets are managed. But, he added, in all likelihood, "there will be different (investment) managers and there will eventually be three separate pools of assets."
ITT pension executives are likely to first conduct an actuarial valuation of each plan, predicted a consultant who worked with a regional telephone company during the AT&T divestiture.
Next, he said, will be an asset allocation review, after which a decision will be made on which managers to transfer to each company.
An "internal reference asset mix" may be established initially, followed by the development of a distinct investment policy, the consultant said.
He expects each company to review its policy toward core investments and active vs. passive asset management.
Currently, ITT's pension fund has an asset mix of 61% stocks, 27% fixed income, 4% real estate equity, 3% cash and 5% in various alternative asset classes.
Said another consultant: "Each company is going to have different liability characteristics, and they will want to apportion the assets accordingly.
"It is not going to be a homogeneous workforce. One or more of the companies may have a younger workforce and want to be more aggressive with their investment portfolio. They would probably want to change the manager line-up anyway."
ITT apparently has not yet notified its current money managers of any changes. Managers contacted by Pensions & Investments said they have not heard from ITT.
