Motorola also will offer eligible U.S. pension plan participants the opportunity to apply for lump-sum pension payments. In total, these actions are expected to reduce Motorola Solutions’ ongoing U.S. pension obligation by $4.2 billion. The company plans to contribute $1.1 billion in cash to its U.S. pension plans in 2014.
“We have substantially reduced the funding volatility associated with our pension plans while protecting benefits for retirees,” says Gino Bonanotte, Motorola Solutions chief financial officer. “Our retirees’ benefits are not changing, just who provides them.”
In what the company announced is 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 October 2, 2014, to November 7, 2014. Total lump-sum payments will be capped at $1 billion, with the smallest amounts qualifying first.
There are no changes for active employees who participate in the plan. Motorola offered the pension plan to U.S. employees hired before January 1, 2005, with no additional benefits accrued for participants as of March 1, 2009.