St. Paul, Minnesota-based manufacturing and consumer company 3M announced on Thursday that it would offload pension liabilities for 23,000 retirees in its employee retirement income plan to annuity provider Metropolitan Tower Life Insurance Company.
The transaction, worth $2.5 billion of 3M’s liabilities and related plan assets will cover 60% of the retirees in the company’s defined benefit plan. Met Tower Life will assume responsibility for making liability payments to retirees on October 1.
According to the company’s Form 5500 for plan year 2022, the 3M Employee Retirement Income Plan had 61,500 participants, and roughly $14 billion in assets. An annual SEC filing reveals that the company’s U.S. pension plan had a funded status of 94% at the end of 2023.
In January, the company announced that it would freeze its pension plan. The freeze will take effect in December 2028. In 2009, the company stopped enrolling new employees into the plan.
The 3M lift-out is only one of several large transactions announced this year, as more and more plan sponsors determine what to do with funding surpluses in their plans. In May, most corporate pensions had more assets than liabilities in their plans, with many firms who track the funded status of corporate plans finding that an overwhelming number have a funded status of over 100%.
A period of higher interest rates and strong equity returns drove the funded status surplus that many plans are enjoying. Megadeals announced this year include Verizon’s $5.9 billion pension risk transfer with Prudential and RGA Reinsurance and Shell’s $4.9 billion transaction with Prudential.
According to insurance research organization LIMRA, single-premium PRT sales reached a high of $14.6 billion in the first quarter of 2024, across 146 contracts.
Metropolitan Tower, based in Lincoln, Nebraska, is a subsidiary of MetLife Inc.
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Tags: 3M, Metropolitan Tower Life Insurance Company, Pension Risk Transfer, PRT