In a move to transfer risk from its pension plan, the NCR Corp. has purchased a single premium group annuity contract from Principal Life Insurance Co.
In a letter to plan participants, NCR said it has worked for several years to minimize the impact of its pension liability on financial results, while also meeting its pension obligations. “This group annuity contract purchase supports that strategy,” the company said.
The transaction will help secure $190 million of benefits for approximately 6,000 former employees or their related beneficiaries whose monthly pension benefit amount under the plan as of Jan. 1, 2017, was $500 or less.
“Because this contract was purchased with existing plan assets, no additional funding of the plan was required for this purchase,” said NCR Treasurer John Boudreau in a statement.
NCR said that any impact of the purchase on the company’s financial statements will be included in the year-end 2017 mark-to-market adjustment, and anticipates that the single premium group annuity contract will be issued by Principal Life Insurance Co. in 2018.
The amount of the future monthly benefit payment for individuals under the group annuity contract will be equal to the amount of each individual’s monthly benefit payable under the terms of the plan. Additionally, the annuity contract provides the same rights to future payments that are currently provided under the terms of the plan, such as survivor benefits.
According to the terms of the agreement, the annuity contract has no bearing on active employees, former employees, or their related beneficiaries who have not started taking monthly benefits under the plan as of Jan. 1, 2017. It also has no bearing on former employees or their related beneficiaries whose monthly benefit amount under the plan as of Jan. 1, 2017, exceeded $500.
“NCR continually monitors and manages pension plan funding,” said NCR in its letter. “The company has carefully planned this group annuity contract purchase to account for proper funding of the plan going forward.”