For 38% of defined benefit plan participants at The Hartford, benefit obligations will be transferred over to Prudential Financial, per a recent agreement between the two companies.
The Hartford will be purchasing a group annuity contract to transfer $1.6 billion—or 29% of the company’s $5.6 billion in U.S. qualified pension plan liabilities. Effective June 30, 2017, the move will hand over responsibility of present and upcoming pension benefits for nearly 16,000 past workers to Prudential. While the agreement means a shift in accountability, the change will not affect pension benefits for any participants.
“We are pleased that this transaction preserves these pension benefits while reducing the company’s long-term pension obligations,” says Marty Gervasi, chief human resources officer for The Hartford.
Relocated participants to Prudential will be sent a notice from The Hartford by July’s close, and then receive detailed information from Prudential in mid-October. However, all participants will continue to collect pension benefits from The Hartford until November 1, 2017, when payment and administration will turn over to Prudential. Those participants unaffected will remain in The Hartford’s plan.
Transaction expectations, based on March 31, 2017, shares outstanding, includes a pension settlement charge to net income of approximately $485 million after-tax, and a decrease to stockholder’s equity of approximately $140 million, or $0.37 per diluted share. To sustain pre-transaction-funded status, The Hartford will contribute $300 million by year-end 2017.