AT&T Inc., Dallas, announced an agreement to purchase group annuity contracts from two Athene Holding subsidiaries to transfer $8.1 billion in U.S. pension plan liabilities.
The company is completing the purchase, which is expected to close Wednesday, from Athene Annuity & Life Co. and Athene Annuity & Life Assurance Co. of New York, according to a 10-Q filing with the SEC on Monday.
AT&T is purchasing the contracts with plan assets and will not be required to make any further contributions to the plan. In August, the insurers will take on the responsibility for paying benefits to about 96,000 AT&T participants and beneficiaries, according to the filing.
AT&T spokeswoman Ashley N. Hoptay said in an email that the population represents about 50% of total retirees and beneficiaries, and those whose benefits are being transferred were selected “based on the form of the benefit payment and the amount.”
Historically, when corporations transfer a portion of their retiree population to insurance companies, they often transfer those who receive below a certain threshold of monthly benefits, since the majority of participants have lower amounts based on years of service. Lowering the population of participants in a pension plan often results in administrative cost savings and lower Pension Benefit Guaranty Corp. fixed-cost premiums, which are based on participant head count.
As of Dec. 31, AT&T had $40.87 billion in U.S. pension plan assets, and $42.83 billion in projected benefit obligations, for a funding ratio of 95.4%, according to its most recent 10-K filing.
