American Axle to offer lump-sum pension payments to 6,000 former employees
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Auto parts manufacturer American Axle & Manufacturing Holdings Inc. says it will offer up to about 6,000 former employees the opportunity to convert their monthly annuity benefit to a cash lump sum benefit.
“We expect that the lump-sum settlements, which will be paid from plan assets, will reduce our liabilities and administrative costs,” the Detroit-based company said in a filing Monday with the U.S. Securities and Exchange Commission.
The offer will be available from Oct. 2 through Nov. 14, American Axle said in the filing.
At year-end 2013, American Axle's pension plans were underfunded by $42 million, with $755.4 million in benefit liabilities and $713.4 million in assets, according to the company's 2013 10-K report. The plans have about 14,000 participants.
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.
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