The Timken Company has entered into an agreement to purchase a group annuity that will reduce its gross pension liability by about US$600 million.
In April, Prudential will begin paying benefits to about 5,000 U.S. Timken retirees and surviving beneficiaries currently receiving payments from Timken’s U.S. retirement plan.
“The annuity purchase will have no impact on the monthly pension benefits Timken retirees and surviving beneficiaries receive today,” says a statement from Timken. “The group annuity contract includes an irrevocable commitment by Prudential to make annuity payments to affected retirees covered under the contract.”
Over the past decade, it’s contributed nearly US$2 billion to its global pension plans, and its U.S. plans are now fully funded. Timken says it decided to take advantage of the favourable funded status in an effort to reduce risk and protect participant pension benefits in the future.
The purchase will be funded by existing plan assets and requires no cash contribution from the company.
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