Manufacturing firm buying annuity to replace 1,900 retirees' pensions

The Lincoln Electric Co. is buying a group annuity contract to provide pension benefits to about 1,900 retirees, the Cleveland-based welding products manufacturer announced Wednesday.

In the latest corporate move to reduce pension liability risks, Lincoln Electric said it will transfer about $425 million in pension plan obligations to The Principal Financial Group.

While Lincoln Electric’s pension program “is fully compliant with government funding requirements, factors, such as low interest rates, a volatile investment marketplace and increased life expectancy have combined to make funding these benefits less predictable and more costly,” Christopher Mapes, Lincoln Electric’s president and CEO, said in a letter to participants.

“After a thorough review, purchasing annuities for our retiree group through an insurance company proved to the best and most efficient solution,” Mr. Mapes added.

The transaction, which will occur on Nov. 1, will affect about 1,900 plan participants currently receiving benefits.

At the end of 2014, Lincoln Electric’s pension plan was nearly fully funded, with $1.05 billion in liabilities and $1.01 billion in assets, according to its latest 10-K report.