Archer Daniels Midland offers pension recipients lump-sum conversion
Posted On: Aug. 7, 2014 12:00 AM CST
Archer Daniels Midland Co. will offer the option to convert their monthly annuity to a cash lump sum to about 10,000 pension plan participants now receiving benefits.
“The company is offering the one-time voluntary lump-sum window in an effort to reduce its long-term pension obligations,” ADM said in a filing Thursday with the U.S. Securities and Exchange Commission.
The Decatur, Illinois-based agribusiness giant estimates that between 20% and 40% of those eligible will accept the offer. That would reduce its pension plan obligations by between $170 million and $340 million and its plan underfunding by between $13 million and $26 million, ADM said in the SEC filing.
The latest offer is the second one ADM has made in recent years to cut its pension costs. In 2012, ADM offered the opportunity to convert future annuities to a lump-sum benefit to between 7,000 and 7,500 vested former employees.
In its 2013 10-K report, ADM said it paid about $134 million in lump-sum payments to those accepting the 2012 offer, cutting its pension benefit obligations by $174 million and reducing plan underfunding by about $40 million.
As of June 30, ADM's U.S. pension plans were underfunded by about $350 million, with assets of $1.65 billion and liabilities of $2.03 billion, an ADM spokeswoman said.
When pension plan participants take lump-sum benefits and are no longer covered by the plan, their former employers do not have to worry about how interest rate fluctuations and investment results could affect how much they will have to contribute to their pension plans to fund future annuity payments.
In addition, when participants take lump sums and move out of the pension plan, employers can reduce certain fixed costs, such as the payment of sharply rising premiums to the Pension Benefit Guaranty Corp.