Kroger Co., Cincinnati, reached an agreement with four local unions to restructure the grocer's participation in two multiemployer pension funds.
The company plans to transfer the pension benefits of about 10,600 union employees to the UFCW Consolidated Pension Plan, Atlanta, from Sound Retirement Trust, Bothell, Wash., according to a May 21 news release.
As part of the transaction, Kroger agreed to transfer about $400 million in previously accrued liabilities to the consolidated pension plan. On an after-tax basis, about $310 million is needed to execute the transaction, the news release said.
The transfer of the liabilities will be paid in six evenly distributed payments to the UFCW Consolidated Pension Plan over the next six years, the release said.
The agreement has been approved by the two multiemployer pension plans, the local unions, and the Pension Benefit Guaranty Corp., the news release said.
"As with previously announced pension restructuring agreements, this agreement allows us to minimize future exposure to market risk, produces a return on investment above our internal hurdle rate by mitigating future costs and provides a more secure future for our associates' pension benefits," said Gary Millerchip, Kroger's chief financial officer, in the news release. "The proactive steps Kroger has taken over many years to address the significant underfunding challenges faced by multiemployer pension plans, puts us in a position of strength to continue to deliver strong and sustainable total shareholder return."
Kroger completed a similar restructuring in 2014 when it moved the liabilities for 870 then-current employees and 840 retirees in Washington state to the UFCW Consolidated Pension Fund, Atlanta, from the Washington Meat Industry Pension Trust, Seattle.
As of Dec. 31, Kroger's pension plan assets totaled $3.569 billion, while projected benefit obligations totaled $3.615 billion, for a funding ratio of 98.7%, according to the company's most recent 10-K filing with the SEC.
As of Dec. 31, 2019, the UFCW Consolidated Pension Fund had $4.3 billion in assets, according to its most recent Form 5500 filing, and the Sound Retirement Trust had $2.4 billion in assets as of Sept. 30, 2019, according to its most recent Form 5500 filing.
Kristal Howard, Kroger spokeswoman, could not be immediately reached for further information.