United Tech to offer pension buyouts
Industrial manufacturing giant United Technologies will offer pension buyouts to some retirees and transfer other pension debts to an insurance company in a move designed to alleviate financial pressure on the company.
United Tech said Friday that the maneuvers would excise about $1.77 billion in pension liabilities from its balance sheet.
Following similar moves in recent years by corporate giants such as General Motors and Verizon, United Tech said it had reached a deal with Prudential Insurance Company of America to assume certain pension liabilities.
There are two key aspects of the plan:
—Retirees with a vested pension who are not currently collecting monthly payments will be given the chance to voluntarily relinquish their benefits in exchange for a one-time, upfront lump-sum payout, the company said. United Tech projects that about 10,000 pensioners will take the deal, reducing the company's liabilities by about $995 million.
A UTC spokeswoman declined to say how many people are eligible for the buyout.
—United Tech will purchase an annuity contract from Prudential in exchange for transferring about $775 million in pension debt to the insurer's portfolio. Consequently, Prudential will make monthly pension payments to about 36,000 United Tech pensioners who get $300 per month or less.
The manufacturer said it expected to record a one-time pre-tax charge of $400 million to $540 million on its fourth-quarter earnings statement.
United Tech stock (UTX) fell 0.5% to $101.61 in pre-market trading.
"This transaction is an important part of United Technologies' long-term strategy to reduce future pension risk and expense," United Tech Chief Investment Officer Robin Diamonte said in a statement. "It will not affect participants remaining in the plans and entrusts the assets leaving the plans to a highly rated insurance company whose core business is retirement security and administration of pension benefits."
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