Pharmaceutical giant Bristol-Myers Squibb is terminating its US Retirement Income Plan, and will transfer $3.8 billion of its US pension obligations through a combination of lump sums and a group annuity contract from Athene Annuity and Life Company.
The retirement plan has approximately 4,800 active employees, 1,400 retirees and their beneficiaries, and 18,000 prior Bristol-Myers Squibb employees who have not yet initiated their benefits. The company said current plan provisions, benefit payment options, and in-pay benefits will remain available for all participants.
“This transaction represents the largest full-plan termination to date that includes both retirees and non-retirees,” Sean Brennan, head of pension risk transfer at Athene, said in a release. “And we believe this approach may provide a blueprint for plan sponsors considering full plan terminations in the future.”
The transferring of pension obligations, which reduces Bristol-Myers Squibb’s future risk and administrative costs, continues the company’s pension de-risking activities, which began in 2009 when it froze its US retirement plan.
There will be a special election window for active Bristol-Myers Squibb employees who are participants in the retirement plan, during which they can elect to begin their pension benefits while remaining employed with the company. The plan will terminate on Feb. 1, and lump sums will be distributed in July 2019, while the transfer to Athene is expected to occur in August 2019.
Under the terms of the transfer agreement, Athene’s life insurance subsidiary, Athene Annuity and Life Co., agreed in advance to provide an annuity contract covering all obligations of Bristol-Myers Squibb’s US Retirement Income Plan for which the plan participants do not elect to receive a lump-sum payment.
Bristol-Myers Squibb said it expects a non-cash pre-tax pension settlement charge of approximately $1.5 billion to$2 billion on closing of the transaction in Q3, which will be excluded from its non-GAAP results. The company also said that non-GAAP pension-related income contributing approximately $0.05 EPS in 2018 is not expected to be recognized in 2019.