Accenture Completes Pension Risk Termination

American General Life Insurance Company and Massachusetts Mutual Life Insurance Company have agreed to take on $1 billion of Accenture’s pension obligations.

Accenture announced it has completed the termination of its U.S. pension plan by entering into agreements with American General Life Insurance Company (AGL), a subsidiary of American International Group, Inc., and Massachusetts Mutual Life Insurance Company.

Under the agreements, the plan has transferred pension assets to AGL and MassMutual to settle approximately $1 billion of outstanding pension obligations. The annuity settlement is part of Accenture’s three-step strategy to reduce its pension obligations in the long term.

The terms of the three-step strategy will be informative to readers considering their own pension risk transfer opportunities. At a high-level the now-finalized plan termination removes a total of $1.6 billion of pension obligations—about $600 million through lump-sum payments to approximately 7,000 active and former U.S. employees who elected to receive such payments, and the rest through the purchase of annuities from the insurance companies.  

Accenture explains that it purchased group annuity contracts from AGL and MassMutual, which are each responsible for assuming a portion of the obligation to make future annuity payments to approximately 9,200 active and former U.S. Accenture employees and their beneficiaries. That transaction closed in late May and the insurers will assume payment responsibility in August 2017.

Finally, the firm has actually created a “new, fully funded defined benefit plan with approximately $200 million of pension obligations with substantially the same terms as the plan for approximately 550 active U.S. employees who remain eligible to accrue benefits.”

The strategy shows how pension risk transfer is a complex act that unfolds through a variety of pathways and providers, Accenture and the insurers agree.