ATI to De-Risk Nearly $1.8B in Pension Obligations

The firm will transfer 85% of its U.S. defined benefit plan obligations to Athene through annuity contracts.

ATI Inc., a manufacturer of specialty materials, announced it will transfer approximately 85% of its U.S. qualified defined benefit pension plan obligations to insurance company Athene through the purchase of group annuity contracts.

According to ATI, it contributed $272 million in cash to its pension plans in 2023, including $222 million in September to fully fund the remaining defined benefit pension liabilities. It also stated that that its U.S. defined benefit pension plans represented $1.77 billion in liabilities, as of the end of 2022.

Under the group annuity contracts, ATI will transfer the gross pension obligations and related plan assets for approximately 8,200 plan participants to Athene Annuity and Life Co. (Iowa) and Athene Annity & Life Insurance Co. of New York, both subsidiaries of Athene Holding Ltd. According to ATI, the move will not change the pension benefits that participants and their beneficiaries are entitled to.

“With this action, ATI meets all of its pension obligations, and everyone benefits,” ATI CEO and Board Chair Robert Wetherbee said in a release. “Our business meets its commitments to all its pension plan participants, through both the annuity purchase and our decision to fully fund our remaining qualified pension obligations. And our shareholders gain confidence knowing these de-risking actions will result in lower, more predictable pension expense in the future.”

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According to ATI, it has now completed seven annuitization deals since 2016, and through pension de-risking transactions, it has reduced the number of its pension plan participants by more than 90%.

According to the most recent Milliman Pension Buyout Index results, the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process increased to 100.5% of a plan’s accounting liabilities in August from 100.2% of those liabilities the previous month.

Milliman data also showed that, as of the end of August, the competitive bidding process was estimated to save plan sponsors approximately 2.4%, and that the average annuity purchase cost among all insurers in Milliman’s index remained unchanged at 102.9% during the month. 

The firm added that plan sponsors planning on making pension risk transactions in the coming year should be watching how interest rates move in reaction to recent inflation and jobs reports.

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