United Technologies Corp., in a transaction which will shave $1.77 billion in pension liabilities from the corporation’s books, is transferring its pension obligations to Prudential and offering buyouts to retirees.
A top executive called pension liabilities the “single biggest issue” the company is facing.
United Technologies will shift $775 million of those commitments, covering about 36,000 retirees and beneficiaries, to Prudential in a transaction that’s expected to close Oct. 12, the Farmington, Connecticut-based industrial company said Thursday in a statement. Also, 10,000 participants are expected to take lump-sum offers, reducing the company’s obligation by approximately $1 billion by Dec. 31. United Technologies said it expects to take a pretax settlement charge of about $400 million to $530 million in the fourth quarter.
“This transaction is an important part of United Technologies’ long-term strategy to reduce future pension risk and expense,” Chief Investment Officer Robin Diamonte said in the statement. “It will not affect participants remaining in the plans and entrusts the assets leaving the plans to a highly rated insurance company whose core business is retirement security and administration of pension benefits.”