Retailer J.C. Penney buys group annuity for retiree pensions

J.C. Penney Co. Inc. is buying a group annuity contract to provide pension benefits to up to 43,000 retirees and their beneficiaries, the Plano, Texas-based retailer disclosed Friday.

In the latest corporate move to reduce pension liability risks, J.C. Penney said it will transfer retirees' pension benefits to Prudential Insurance Co. of America through the purchase of a group annuity. The annuity purchase will be funded with assets of the company's pension plan, which J.C. Penney said, will remain overfunded after the transaction is completed.

The big annuity purchase, along with earlier pension de-risking actions in which 12,000 retirees and surviving beneficiaries receiving benefits and 1,900 former employees eligible for but not yet receiving benefits, accepted J.C. Penney's offer to convert their monthly annuity benefits to cash lump sums, will reduce the company's more than $5 billion in pension liabilities by between 25% and 35%, the company said.

“These actions not only continue to provide excellent benefit security for our retirees, but also further the company's objective of de-risking the plan while improving the company's long-term risk profile,” J.C. Penney Chief Financial Officer Ed Record said in a statement.

At year-end 2014, J.C. Penney's U.S. pension plan was slightly overfunded with $5.47 billion in assets and $5.25 billion in liabilities, according to its latest 10-K report.