October 18, 2012 (PLANSPONSOR.com) – The Prudential Insurance Company of America has signed an agreement with Verizon Communications Inc. to transfer approximately $7.5 billion of the Verizon Management Pension Plan obligations to Prudential.
Upon closing, which subject to certain conditions is expected to occur in December 2012, the Verizon Management Pension Plan will purchase a group annuity contract from Prudential. The insurer will assume responsibility for making payments to the retirees covered by the agreement—approximately 41,000 Verizon Management Pension Plan participants who retired and started receiving pension benefits before January 1, 2010.
The Verizon transaction is expected to be the second largest insured annuity settlement in U.S. history, trailing only the GM deal (see “GM Transfers Some Pension Risk”).
"The size of the pension settlement actions announced in 2012 is redefining the market," noted Ari Jacobs, senior partner and Global Retirement Solutions Leader at Aon Hewitt. "In the U.S., the entire volume of pension liabilities annuitized in recent years has been about $1 billion per year and no single transaction has exceeded $1 billion since the 1980s. The transactions by Verizon and GM are orders of magnitude larger than this and likely to be important in the continuing trend in pension de-risking and settlement strategies. Companies considering this strategy need to understand that each situation requires a unique approach to achieve their goals." Aon Hewitt was the lead strategy partner to Verizon in this transaction. In May 2011, Prudential completed the nation’s first pension buy-in transaction when Hickory, North Carolina-based Hickory Springs Manufacturing Company signed on as Prudential’s inaugural client (see “Pru Completes Nation’s First Pension Buy-In”).