Glass products maker buys annuities to shift pension liabilities
Reprints
PPG Industries Inc. is buying group annuity contracts to provide pension benefits to about 13,400 retirees and survivors, the Pittsburgh-based coatings, specialty materials and glass products manufacturer announced.
In the latest corporate move to reduce pension liability risks, PPG on Monday said it will transfer about $1.6 billion in pension plan obligations to Massachusetts Mutual Life Insurance Co. and Metropolitan Life Insurance Co. for salaried and nonunion retirees or their survivors who began receiving benefits on or before April 1, 2016. All other participants will remain in the company's pension plans.
“The agreement will transfer the payment administration and obligations to these high-rated insurance companies with a long history of efficiently providing annuity benefits,” PPG said in a statement.
At year-end 2015, PPG had $5.35 billion in liabilities and $4.63 billion in assets in its pension plans, according to its latest 10-K report filed with the U.S. Securities and Exchange Commission.
Several dozen companies, including General Motors Co., Kimberly-Clark Corp. and Verizon Communications Inc., in recent years have taken actions similar to PPG's by shifting pension plan liabilities to insurers through the purchase of group annuities.
For employers, the appeal of such an approach is that they no longer are exposed to higher-than-expected contributions to their pension plans, if, for example, investment returns are less than expected and/or interest rates decline, boosting the value of plan liabilities.
In addition, through derisking, employers also reduce premium payments to the Pension Benefit Guaranty Corp. by reducing the size of their pension plans.
The so-called flat rate PBGC premium is based on the number of participants a company has in its pension plan, while plan sponsors are liable for an additional so-called variable rate premium if their plans are underfunded.
Read Next
-
Supreme Court kicks Verizon pension derisking back to lower court
The U.S. Supreme Court Monday asked a federal appeals court to review the panel's earlier decision upholding the right of communications firm Verizon Communications Inc. to “derisk” the pension plan offered to management employees.
Related Stories
-
Supreme Court kicks Verizon pension derisking back to lower court
-
Corporate pension buyouts exceed $1 billion for fourth straight quarter
-
