United Technologies Corp., Farmington, Conn., and Raytheon Co., Waltham, Mass., have announced their intention to merge in the first half of 2020. With more than $90 billion in retirement plan assets between them, staff at the companies will have to compare the plans to determine how to merge them, if at all.
As of Dec. 31, Raytheon Co. had $25 billion in defined benefit plan assets, according to the company's most recent 10-K filing, and as of Dec. 31, 2017, the company had $19 billion in defined contribution plan assets, according to its most recent 11-K filing.
As of Sept. 30, United Technologies Corp. had $26 billion in defined benefit plan assets and $24 billion in defined contribution plan assets, according to Pensions & Investments data.
For their defined benefit plans, according to the companies' most recent 10-K filings, UTC's defined benefit plan funding ratio was 93.3%, well above Raytheon's 75.9% as of Dec. 31. While Raytheon has made discretionary contributions in the past several years, it still has a minimum required contribution of $356 million in 2019, while UTC's plan has no such minimum requirement.
UTC's DB plan is also further along in its liability-driven investing path than Raytheon. As of Sept. 30, according to P&I data, the actual allocation to domestic fixed income for UTC was 48%. Raytheon, meanwhile, had 32% allocated to fixed income as of Dec. 31, according to its 10-K filing.
UTC's DB plan allocation as of Sept. 30 was: 48% domestic fixed income, 31% global equities (excluding real estate investment trusts), 10% multiasset strategies, 6% equity real estate and 5% private equity, according to P&I data.
Raytheon's DB plan allocation as of Dec. 31 was: 32% fixed income, 26% domestic equities, 17% international equities, 8% absolute return, 8% private equity, 7% private real estate, and 2% cash and cash equivalents.
One positive for both companies' DB plans is they share Bank of New York Mellon as custodian, according to P&I data.
On the defined contribution side, United Technologies' record keeper was Alight Solutions as of Sept. 30, according to P&I data, while Raytheon's record keeper is Fidelity Investments as of Dec. 31, according to its most recent 11-K filing. Past mergers of companies with different DC plan record keepers have seen RFPs issued for a common record keeper, such as American Airlines Inc. and US Airways Inc. merger in 2015, resulting in one common record keeper, Fidelity, for all plans.
Comparing manager lineups, UTC reported State Street Global Advisors as the sole manager of domestic equity, international equity and fixed-income funds as of Sept. 30, according to P&I data. That manager is absent from Raytheon's lineup, while the company's latest 11-K filing listed equity managers including Harris Associates, Northern Trust Asset Management, Oppenheimer Investments, T. Rowe Price Group and Vanguard Group.
As of Sept. 30, UTC's defined contribution plan had 12 investment options and a target-date fund lineup managed by AllianceBernstein. Raytheon's had 13 investment options and a common stock fund, but no target-date fund lineup listed.