US. International Paper and Prudential Transfer $1.6 Pension Obligation
As part of the PRT agreement, Prudential will assume the responsibility for paying pension benefits to about 23,000 International Paper retirees.
International Paper announced plans to settle approximately $1.6 billion of its pension obligations by purchasing a group annuity contract from The Prudential Insurance Company of America.
The parties size the pension risk transfer (PRT) deal as the second-largest to take place thus far in 2018, behind a group annuity transaction between MetLife and FedEx that covered some 41,000 retirees and beneficiaries and $6 billion in assets.
This latest agreement is, in fact, the second and, by dollar, value larger pension risk transfer between the two companies in just over a year. Last October, International Paper agreed to transfer approximately $1.3 billion of its pension liabilities to Prudential, an agreement covering 45,000 of International Paper’s retirees.
According to Prudential, such agreements reflect a growing desire among companies to take active steps to reduce the risks, costs and liabilities associated with running a defined benefit pension plan.
The deal comes as more large employers close to within striking distance of PRT transactions. Nearly one-third of pensions have a funding status of 95% or more, making a buyout or risk transfer deal two possibilities they could pursue, according to analysis of 500 plans with collective assets of more than $100 billion published by RiskFirst. The number of plans with this high level of funding status increased 50% in the first half of 2018.
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