IBM completes $6 billion pension buyout with Prudential, its second in 2 years

International Business Machines Corp., Armonk, N.Y., purchased a group annuity contract from Prudential Insurance Co. of America to transfer $6 billion in defined benefit plan liabilities.

The purchase of the contract, which closed Sept. 11, transfers the benefit-paying responsibility for about 32,000 retirees and beneficiaries covered by the IBM Personal Pension Plan, according to an 8-K filing with the SEC.

According to the filing, the transferred participants represent “certain pension benefits that began to be paid prior to 2016.”

Prudential will take on the responsibility for paying the benefits effective Jan. 1, according to the filing.

The announcement by IBM comes almost exactly two years after a previous buyout, in which the company purchased group annuity contracts from Prudential and Metropolitan Life Insurance Co. to transfer a total of $16 billion in U.S. defined benefit plan liabilities.

Those transactions, which closed Sept. 13, 2022, combined to make up the second-largest pension plan buyout in U.S. history.

In between these two transactions, IBM had announced in November it was reopening its defined benefit plan by scrapping its 401(k) corporate match and replacing it with a cash balance component called a retirement benefit account.

The two buyout transactions and the reopening of the defined benefit plan have been made possible by the plan’s significant funding surplus.

As of Dec. 31, IBM’s U.S. pension plan assets totaled $24.44 billion, while projected benefit obligations totaled $19.85 billion, for a funding ratio of 123.1%, according to its most recent 10-K filing.