The passage of the Tax Cuts & Jobs Act (TCJA) has kick-started a slew of companies announcing voluntary contributions to their pension funds, as last week alone saw no fewer than 14 publicly traded companies announce recent or impending contributions of at least $100 million, totaling nearly $8.5 billion.
The high volume of voluntary pension fund contributions is an expected result of the new tax reform law, as companies seek to take advantage of a tax deduction at a higher rate. Plan sponsors can, under certain circumstances, make a contribution up to 8 ½ months after the end of the year and still have it count as a deduction for the previous tax year, according to Mike Moran, Goldman Sachs Asset Management’s chief pension strategist.
So it’s likely this is just the beginning of a trend of companies making large voluntary contributions in 2018. It may also be an indication that many companies are ramping up their pension funded status in anticipation of enacting de-risking, or risk transfer, activities as higher-funded plans are easier to transfer to a third-party insurance company.
The following is a list of publicly traded companies that made announcements of recent or forthcoming voluntary pension contributions during the week of Jan. 22 to Jan. 26 in order of contribution size:
Fed Ex
Fed Ex announced a voluntary contribution of $1.5 billion to the company’s pension plan as part of a $3.2 billion package that included wage increases, bonuses, and expanded US capital investment, which it said was tied to the passage of the Tax Cuts and Jobs Act.
FirstEnergy Corp
The electric utility company last week announced a $2.5 billion equity investment from prominent investors, $750 million of which will be used to fund its pension. On top of a $500 million contribution announced Jan. 5, the company has contributed $1.25 billion to its pension in January alone. As a result, the company said will have no required contributions in 2019 and 2020, and the company estimates a 2021 contribution of approximately $80 million.
Raytheon
The aerospace and defense contractor reported that full-year 2017 operating cash flow from continuing operations was $2.7 billion after making a $1 billion pretax discretionary cash contribution to the company’s pension plans.
Caterpillar Inc.
The manufacturer of construction and mining equipment announced in its full-year results that the company made a discretionary contribution to US pension plans of $1 billion in Q4.
UBS
UBS said it will make a payment of up to CHF720 million ($770.4 million) in three installments in 2020, 2021, and 2022.
AbbVie
In its full-year 2017 results, the pharmaceutical company said it plans to “accelerate pension” funding by $750 million in 2018.
3M
Industrial technology giant 3M said in its Q4 and full-year 2017 results that it contributed $600 million to its US pensions during the last quarter of the year following the signing of the TCJA.
Northrop Grumman
The aerospace and defense company reported in its full-year 2017 and Q4 results that it made a $500 million pre-tax discretionary pension contribution in Q4 2017.
Celanese Corp.
The technology and specialty materials company noted in its full-year 2017 results that free cash flow was $825 million before taking into account a $316 million voluntary contribution to fully fund its qualified US pension plans.
Rockwell Automation, Inc.
The provider of industrial automation power, control, and information solutions revealed in its Q1 2018 results a discretionary pre-tax contribution of $200 million to the company’s US pension trust in Q4 of 2017.
Moog Inc.
In its fiscal Q1 results, the aerospace and defense company included in its 2018 outlook incremental accelerated pension contributions of $180 million.
Allegheny Technologies Inc.
In its full-year 2017 results, the manufacturer of specialty materials and complex components said that cash provided by operations included a $135 million contribution to the ATI Pension Plan.
Brown-Forman
The spirit and wine company’s board of directors approved several capital deployment actions, which included fully funding the company’s current defined benefit pension liability of $120 million.
Illinois Tool Works Inc.
The manufacturer of industrial products and equipment said in its Q4 and full-year results that its free cash flow would have been $2.2 billion, if excluding $115 million related to an additional discretionary pension contribution.
Tags: Pension, Pension Contributions, Tax, Tax Cuts & Jobs Act