Kimberly-Clark has entered into purchase agreements with The Prudential Insurance Company of America and Massachusetts Mutual Life Insurance Company for group annuity contracts that will transfer payment responsibility for retirement pension benefits owed to approximately 21,000 Kimberly-Clark retirees in the U.S.
Starting June 1, Prudential will begin making benefit payments to the affected retirees along with providing administrative services. While Prudential will be the annuity administrator for the benefit payments, each retiree’s benefit will be split evenly between Prudential and MassMutual.
State Street Global Advisors (SSgA) was appointed as the independent fiduciary representing the interests of the impacted retirees. SSgA evaluated the insurance companies that were available to provide annuities and the potential annuity structures, and based upon a number of factors, including the financial strength of insurers, it determined that a transaction split between Prudential and MassMutual was the safest available annuity structure to provide retiree benefits.
By transferring the obligations to Prudential and MassMutual, Kimberly-Clark will reduce its pension projected benefit obligation by approximately $2.5 billion. The annuity purchase will be funded with assets of Kimberly-Clark’s U.S. pension plan. The company expects to make a $400 to $475 million contribution to the plan to support this transaction.
“The group annuity contracts from Prudential and MassMutual, both highly rated insurance companies and experts in this field, provide excellent benefit security for our retirees, while further reducing non-core financial risk for Kimberly-Clark,” says Chief Financial Officer Mark Buthman.
Deutsche Bank and Towers Watson served as strategic advisers to Kimberly-Clark for this transaction.