October 1, 2014
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
Pharmaceutical giant Bristol-Myers Squibb Company will transfer pension liabilities of $1.4 billion to insurance firm Prudential in order to reduce the financial risks associated with managing the plan and shed the burden of low interest loans on their balance sheet, the company said today in a statement.
Instead, Bristol-Myers will purchase a group annuity to cover 8,000 U.S. retirees and their beneficiaries. The switch allows Bristol-Myers to slash its pension obligations to $3.6 billion from $5 billion, Ken Dominski, a company spokesman, told Bloomberg.
Bristol-Myers joins other marquee name firms such as General Motors Co., Verizon Communications Inc., and Motorola Solutions Inc. in handing over their pension plans to Prudential as low interest rates make it increasingly difficult for large companies to earn more money on pension payouts for the future.
“The transaction reduces risk in the plan and better manages the ongoing variations in cost associated with its maintenance,” said the company in a statement, “while entrusting current retirees and their beneficiaries’ pensions to a financial institution with expertise in the long-term management of retirement benefits.”
The transfer is expected to take place in December 2014, and will affect beneficiaries of the company in the U.S. who received their first monthly retirement benefit before June 1, 2014. All will continue to receive the same amount of per month.
“Bristol-Myers Squibb’s U.S. Retirement Plan in a strong financial position, and the obligations associated with this transaction will require no additional cash contributions by the company,” the company added.
