Raytheon announced that it will reduce its pension obligations by $923 million, through the purchase of a group annuity contract from The Prudential Insurance Company of America, a subsidiary of Prudential Financial, Inc.
According to details shared by both firms, the agreement transfers the responsibility for paying certain pension benefits to approximately 13,000 U.S. retirees, as well as their beneficiaries, from Raytheon’s previously discontinued operations.
Peggy McDonald, the senior vice president who led negotiations for Prudential, says the firm is committed to providing vested participants, retirees and benefices seamless transition. As a result of the transfer, Prudential will become immediately responsible for making continuing payments to the affected retirees and their beneficiaries, in accordance with the group annuity contract.
Scott Kaplan, Prudential’s head of pension risk transfer, points out that last year alone, Prudential made more than $11 billion in pension payments to more than 1.3 million retirees and their beneficiaries. Several other large insurance and financial services firms are also increasingly active in this marketplace. They are responding to employers’ desire to manage the total costs of the organization’s pension plan; to mitigate the impact of changing actuarial mortality assumptions, including potential future changes; and to address the impact of rising Pension Benefit Guaranty Corporation (PBGC) premiums.