Motorola Solutions has reached an agreement with the Prudential Insurance Company of America, under which the insurer will assume responsibility for the monthly pension benefits for retirees. Motorola Solutions also will offer eligible U.S. pension plan participants the opportunity to apply for lump-sum pension payments.
These actions are expected to reduce Motorola Solutions’ ongoing American pension obligation by US$4.2 billion. The company plans to contribute US$1.1 billion in cash to its American pension plans in 2014.
“We have substantially reduced the funding volatility associated with our pension plans while protecting benefits for retirees,” says Motorola Solutions chief financial officer Gino Bonanotte. “Our retirees’ benefits are not changing, just who provides them.”
In the third-largest transaction of its kind, the Motorola Solutions pension plan intends to purchase a group annuity contract from Prudential under which Prudential will pay and administer future benefits to the approximately 30,000 retirees who currently receive payments. The transaction is expected to be completed in 2014, with Prudential assuming responsibility for making the benefit payments beginning in early 2015.
In addition, approximately 32,000 pension plan participants will be able to apply to receive a lump-sum payment of their accrued, vested pension benefit. To be eligible, participants must have left the company before June 30, 2014, and accrued a pension benefit but have not yet started receiving benefit payments. Participants must apply for the opportunity during the application period of Oct. 2, 2014 to Nov. 7, 2014. Total lump-sum payments will be capped at US$1 billion, with the smallest amounts qualifying first.
There are no changes for active employees who participate in the plan. Motorola offered the pension plans to U.S. employees hired before Jan. 1, 2005, with no additional benefits accrued for participants as of March 1, 2009.
Related articles: