IBM De-Risks $16 Billion in Pension Obligations

IBM reported in an SEC filing on September 13 that it has transferred $16 billion worth of defined benefit pension plan obligations to Prudential and MetLife in one of the biggest pension risk transfer deals ever.

“The overall funded status of the plan makes the transfer of a portion of the pension liabilities and assets to an insurance company a logical next step to further de-risk retirement-related plans,” a statement from IBM says. The company’s pension plan had a funded level of 112% as of the end of 2021.

The deal is worth nearly three times the record $5.5 billion worth of pension risk transfer volume recorded during the first quarter of the year, according to a report by Legal & General.

Under the separate agreements, IBM bought group annuity contracts covering approximately 100,000 participants and beneficiaries to transfer to Prudential and MetLife approximately $16 billion of the company’s pension plan obligations related to certain benefits that began before 2016. The amount represents more than 40% of the plan’s obligations. The insurance companies will evenly divide the responsibility to pay the pension benefits due on or after January 1, 2023, with Prudential as the lead administrator.

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The IBM statement says the company expects to incur a non-operating, non-cash, pre-tax charge of approximately $5.9 billion during the third quarter related to the accelerated recognition of actuarial losses for the pension plan.

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Tags: annuity contracts, De-Risking, Defined benefit (db) pension plans, IBM, Metropolitan Life, obligations, Pension, Pension Risk Transfer, Prudential

A group composed of 13 state treasurers and the New York City comptroller has released an open letter denouncing as shortsighted the blacklisting of certain asset managers by other states that oppose environmental, social and governance-based investing.

“Blacklists are a backlash response on behalf of political and corporate interests seeking to interfere with the progress made by those of us who believe in collaboration and engagement. We work towards developing common goals, along with other investors and enlightened companies throughout the world,” wrote the group in a letter posted to the website For the Long Term. “The blacklisting states apparently believe, despite ample evidence and scientific consensus to the contrary, that poor working conditions, unfair compensation, discrimination and harassment, and even poor governance practices do not represent material threats to the companies in which they invest. They refuse to acknowledge, in the face of sweltering heat, floods, tornadoes, snowstorms and other extreme weather, that climate change is real and is a true business threat to all of us. We disagree.”

States including Texas, West Virginia and Florida have recently passed laws that prohibit the investment of public funds or conducting of state business with financial firms, including asset managers, that are involved in net-zero climate campaigns or that have adopted other ESG investment principles. In August, 19 state attorneys general wrote to BlackRock accusing the firm of violating its fiduciary duty to its investors by investing according to ESG principles.

The state treasurers and comptroller’s letter says disclosure, transparency and accountability by investors make companies “more resilient by sharpening how they manage, ensuring that they are appropriately planning for the future.”

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The group said that their work, “alongside those of other investors, employees, and customers,” has “caused many companies to evolve their business models and their internal processes, better addressing the long term material risks that threaten their performance.”

The following officials signed the statement:

Maine Treasurer Henry E. M. Beck, Nevada Treasurer Zach Conine, Delaware Treasurer Colleen C. Davis, New Mexico Treasurer Tim Eichenberg, Illinois Treasurer Michael W. Frerichs, Wisconsin Treasurer Sarah A. Godlewski, Massachusetts Treasurer Deborah B. Goldberg, New York City Comptroller Brad Lander, California Treasurer Fiona Ma, Rhode Island Treasurer Seth Magaziner, Vermont Treasurer Beth Pearce, Washington State Treasurer Michael J. Pellicciotti, Oregon Treasurer Tobias Read and Colorado Treasurer David L. Young.

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Tags: environmental social and governance investing, ESG