January 23, 2015 – North Canton, Ohio-based bearings and power transmissions manufacturer The Timken Co. said it is buying a group annuity to provide pension benefits to about 5,000 retirees and their beneficiaries.
In the latest corporate move to reduce pension liability risks, Timken said Thursday that it will transfer about $600 million in pension plan obligations to Prudential Insurance Co. of America by purchasing the group annuity.
The agreement covers about 5,000 U.S. retirees, or their survivors, who began receiving pension benefits prior to April 1, 2014. The liability transfer to Prudential is expected in April, Timken said. The deal will “reduce risk and protect participant benefits going forward,” Timken said in a statement.
The purchase will be funded by pension plan assets and will not require cash contributions from the company, Timken said.
At the end of 2013, Timken’s pension plans were slightly overfunded with $3.3 billion in assets and $3.1 billion in liabilities, according to its 10-K report.
Timken’s move followed announcements last fall by Schaumburg, Illinois-based Motorola Solutions Inc. that it would shift about $3 billion in pension plan obligations for some 30,000 retirees through buying a group annuity from Prudential; and by New York-based Bristol-Myers Squibb Co., which purchased a group annuity from Prudential to shift about $1.4 billion in pension obligations to the insurer.
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