Visteon to Transfer Some Pension Liability

July 17, 2014 ( – Visteon Corporation, a global automotive supplier, will purchase a group annuity contract covering approximately one-third of its U.S. pension liability.

The company, based in Van Buren Township, Michigan, announced it has entered into an agreement to transfer certain U.S. pension assets to Prudential Insurance Company of America to settle approximately $350 million of its $1.1 billion in outstanding U.S. pension obligations. Under the agreement, the Visteon Pension Plan will purchase a group annuity contract from Prudential, which will then assume the obligation to make future annuity payments to certain Visteon retirees.

The transaction is designed to further Visteon’s objective of reducing risk in the pension plan and better managing the ongoing cost volatility of such plans, while continuing to meet its obligation to all current participants. The annuity purchase requires no immediate cash contribution from the company and will be funded by existing plan assets.

Visteon says the pension transfer will not change the amount of the monthly pension benefit received by affected retirees and surviving beneficiaries. The group annuity contract includes an irrevocable commitment by Prudential to make annuity payments to affected retirees covered under the contract.

The auto-parts manufacturer made a deal with the Pension Benefit Guaranty Corporation (PBGC) in 2010 to keep its pension plans from being terminated (see “Visteon to Keep Pension Plans Running”). It was previously reported that the company has offered lump-sums to certain terminated, vested pension plan participants in an effort to lower risk.

Other large auto-industry companies have also taken actions to de-risk their pension plans in recent years, including GM (see “GM Transfers Some Pension Risk”) and Ford (see “Ford Offers Lump-Sums to De-Risk Pension”).