Motorola Solutions announced that it will offload the pension obligations of approximately 30,000 retirees.
Prudential Insurance Company will assume the responsibility of managing the communication company’s retiree defined benefit pension assets and disbursing monthly payments.
The group annuity contract with Prudential is the third largest transaction of its kind. In a statement, Motorola said it expects to reduce its ongoing pension obligations by $4.2 billion.
“We have substantially reduced the funding volatility associated with our pension plans while protecting benefits for retirees,” said Gino Bonanotee, Motorola’s CFO. “Our retirees’ benefits are not changing, just who provides them.”
The company said the transaction is expected to be completed this year, with Prudential issuing benefit payments early in 2015.
More than 5,700 companies have transferred their pension liabilities to Prudential. All told, the company’s retirement division manages the benefits of 1.6 million participants.
“Guaranteeing benefits has been a part of Prudential’s core business for more than 85 years. We look forward to welcoming these retirees to Prudential and providing them with retirement income security,” said Phil Waldeck, head of pensions and structured solutions for Prudential Retirement.
In addition to transferring pension obligations of existing retirees, another 32,000 defined benefit participants will be eligible to receive a lump-sum payment of their accrued benefits. The offer will be extended to former Motorola employees who left the company before June 30, 2014, and who have not yet started receiving benefit payments.
As a part of the deal, total lump-sum payments will be capped at $1 billion. The smallest lump sums will be the first to qualify.
Current employees enrolled in Motorola’s defined benefit plan will not be affected by the contract. Only Motorola employees hired before January 1, 2005 are eligible for participation in the company’s defined benefit plan.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
