Sears Transfers Pension Liabilities to MetLife in “De-risking” Move

Beginning August 1, 51,000 participants will receive benefit payments from MetLife.

Joining the trend towards “pension de-risking,” Sears Holdings Corp. (SHC) has annuitized $515 million of its pension liabilities with Metropolitan Life Insurance Company. Under the agreement, MetLife will become responsible for paying future pension benefits to about 51,000 Sears retirees.

The move will reduce Hoffman Estates, Illinois-based Sears’ pension plan, and protect it from rising future costs and plan administration expenses. Discussing the move on the company’s first quarter conference call, Rob Riecker, the company’s chief financial officer, said that the transfer reduced the size of Sears Pension Plans by about 51,000 participants. The company has contributed more than $3.7 billion to the plan since 2005.

Beginning on August 1, these participants will receive their pension benefit payments from MetLife. They will receive the same benefit amounts they received from Sears.

In a communication to impacted pension plan beneficiaries, Sears noted, “SHC determined that purchasing a group annuity contract for selected retirees from an insurance company would be an efficient way to continue delivering pension benefits for approximately 50,000 retirees (including beneficiaries), while also controlling the cost and reducing business risk.”

Other companies that have engaged in such “pension de-risking” moves include Kimberly-Clark – which entered into deals with Prudential Insurance Company and Massachusetts Mutual Life Insurance Co., with an eye to saving about $2.5 billion through the move – as well as other major corporations such as Motorola, Bristol-Myers Squibb, General Motors, and Verizon.

Tags: , , ,