FedEx Sending $6 Billion in Pension Liabilities to MetLife

Transaction is largest risk transfer in US since Verizon/Prudential deal.

FedEx will unload $6 billion in liabilities when insurance titan MetLife takes on the payment annuity benefits for approximately 41,000 of the mail carrier’s pensioners and beneficiaries.

For the transaction, which will occur from a combination of cash and pension plan assets, FedEx will buy a group annuity contract from the insurance giant. MetLife will then take on the responsibility of paying the beneficiaries in the agreement.

The move is being touted at the largest US pension buyout in years and continues the trend of pension plans selling off their liabilities as they look to de-risk. The last time the US saw a risk transfer this large was in 2012, when Verizon shifted $7.5 billion in pension liabilities to Prudential Insurance.

Plan participants are also being told not to take any action at this time as the benefit payments will not change under the new contract.

Alan B. Graf, Jr., FedEx’s executive vice president and chief financial officer, said the agreement “better positions FedEx to manage future pension plan costs.”

“By taking on a portion of the payment obligations of the FedEx defined benefit pension plans, we will help FedEx secure its pension obligations and provide its retirees with financial security,” Michel Khalaf, MetLife’s president of its US and EMEA businesses, said.

FedEx will include a one-time non-cash pension settlement charge for the deal in its fiscal 2018 year-end mark-to-market pension accounting adjustments in its Q4 earnings release.

In Fiscal 2017 and 2018, FedEx contributed $4.5 billion to its pension plans.

The transaction is expected to close on May 10.

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