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Bristol-Myers Squibb signs $1.4 billion pension buyout deal

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Bristol-Myers Squibb signs $1.4 billion pension buyout deal

Bristol-Myers Squibb Co. said Tuesday that it is buying a group annuity to provide pension benefits to about 8,000 retirees and their beneficiaries.

In the latest corporate move to reduce pension liability risks, Squibb will transfer about $1.4 billion in pension plan obligations to Prudential Insurance Co. of America by purchasing the annuity.

The agreement covers about 8,000 U.S. plan participants who retired and began receiving pension benefits prior to June 1. The transfer of the liabilities to Prudential is expected to occur in December, Squibb said.

“The transaction reduces risk in the plan and better manages the ongoing variations in cost associated with its maintenance while entrusting current retirees and their beneficiaries' pensions to a financial institution with expertise in the long-term management of retirement benefits,” the New York-based pharmaceutical firm said in a statement.

Squibb said the pension plan covering the affected participants “is in a strong financial position, and the obligations associated with this transaction will require no additional cash contributions by the company.”

At the end of 2013, Squibb's pension plans were slightly overfunded with $7.4 billion in assets and $7.2 billion in liabilities, according to its 10-K report.

Squibb's move follows last week's announcement by Schaumburg, Illinois-based Motorola Solutions Inc. that it is shifting about $3 billion in pension plan obligations for about 30,000 retirees through the purchase of a group annuity, also from Prudential.

In 2012, General Motors Co. and Verizon Communications Inc. also signed multibillion-dollar pension buyout deals with Prudential.

More employers, consultants say, are expected to take such actions. Through purchasing an annuity and transferring the benefit obligations to an insurer, employers save on costs such as premium payments to the Pension Benefit Guaranty Corp., as well as fees and costs associated with offering and administering their pension plans.

In addition, employers taking such actions no longer are exposed to fluctuating interest rates and investment results that can cause major changes in their pension plan costs and contributions.

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