Federal Express and supermarket chain The Kroger Co. each plan to contribute $1 billion to their respective defined benefit pension plans, according to SEC filings.
FedEx said in its annual report filed with the SEC that “we anticipate making contributions totaling $1 billion” to its US pension plans. It said that approximately $700 million of that is expected to be required.
The company also said it has a credit balance from its cumulative excess voluntary pension contributions over what it is required to pay that exceeds $3 billion.
“The credit balance is subtracted from plan assets to determine the minimum funding requirements,” said the company. “Therefore, we could eliminate all required pension contributions to our principal US pension plans for several years if we were to choose to waive part of that credit balance in any given year. Our US pension plans have ample funds to meet expected benefit payments.”
FedEx’s filing also revealed that, so far in 2017, its contributions to its US pension plans are more than triple the payments the company made in 2015 and 2016 combined. It said it contributed $660 million in 2015 and 2016, and has contributed $2 billon in 2017. It said $1.3 billion of this was made in May to approximately 18,300 former employees who elected to receive their benefit payments early in a lump sum under a voluntary program offered to qualifying participants.
Meanwhile, Kroger said in an SEC filing that it had conducted a review of the structure and benefits of its sponsored defined benefit plans, and that as a result, the company will make several changes.
“We will make a contribution to the plan this year of up to $1 billion that we believe will significantly address the underfunded position of the plan,” said the company. Kroger will issue debt to pay for the funding of the pension liability, and in a separate SEC filing said it is offering three series of notes due in 2022, 2027, and 2048, to raise a total of $1.5 billion. It also said that the company’s overall balance sheet obligations will not change as a result of the pension contribution. “We are committed to maintaining our current investment-grade rating,” said the company.
Additionally, certain participants’ benefit balances will be distributed out of the plan via a transfer to other qualified retirement plan options, or a lump sum payout, based on each participant’s choice.
Kroger said there will be a one-time expense in 2017 associated with the settlement of its obligations for the eligible participants’ pension balances, and that the one-time cost has not been factored into its guidance for the year.
“We believe a contribution to the plan and payout to participants at this time are strategic opportunities,” said Kroger, “based on the current interest rate environment, the potential future changes to the US tax code, and scheduled Pension Benefit Guaranty Corporation fee increases.