By Muskan Arora
International Business Machines Corp (IBM) entered
into an agreement with Prudential Insurance Company of America to transfer $6bn
in defined benefit plan liabilities.
The annuity purchased, which closed
September 11, transfers the benefit-paying responsibility of 32,000 retirees
and beneficiaries under IBM Personal Pension Plan, as disclosed in an 8-K
filing with the SEC.
“The purchase of the group annuity contract
was funded directly by assets of the Plan and required no cash contribution
from the Company,” as stated in the filing.
“Under the group annuity contract,
Prudential has made an irrevocable commitment, and will be solely responsible to pay the pension benefits of each Transferred Participant that are due on and
after January 1, 2025,” said the filing.
“The transaction will result in no changes
to the amount of benefits payable to the Transferred Participants,” stated the
filing.
As per the filing, few transferred participants represent “certain pension benefits that began to be paid prior to 2016.”
This transaction comes in almost after two years of the previous buyout, in which the company purchased $16bn group annuity contracts from Prudential and Metropolitian Life Insurance Co. to transfer to its U.S. defined benefit plan liability.
At that time, it was the largest ever deal
completed and is the second-largest pension plan buyout in U.S. history.
Between these transactions, in November IBM
announced the re-opening of its defined benefit plan by replacing the 401 (k) corporate
match with cash balance component.
As of Dec. 31, IBM’s U.S. pension plan
assets are at $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.
