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Risk

Weyerhaeuser Purchases Annuity to Reduce US Pension Liabilities

Move is expected to reduce liabilities by 30%, and participants and beneficiaries by 50%.

By Michael Katz

The Weyerhaeuser Co., one of the world’s largest private owners of timberlands, said it will transfer a portion of its US pension assets and liabilities to an insurance company by purchasing a group annuity contract. The company said the move will reduce the liabilities of its US pension plan while maintaining its current funded status.

Weyerhaeuser will also allow certain US pension plan participants to elect an immediate lump-sum distribution, which will be paid from plan assets during the fourth quarter of the year.

Weyerhaeuser said that following the lump-sum distributions, it will transfer a portion of its US pension assets and liabilities to the group annuity contract. As part of the group annuity contract purchase, the insurer will assume responsibility for annuity administration and benefit payments to select retirees. The transaction is expected to close in 2019, and there will be no change to retirees’ pension benefits as a result of the group annuity transaction.

The company said it expects the lump-sum and group annuity transactions will reduce the pension liabilities of its US plan by approximately 30% and reduce the number of plan participants and beneficiaries by approximately 50%.

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In order to maintain the plan’s current funded status, Weyerhaeuser said it will contribute approximately $300 million (approximately $186 million after-tax) to its US pension plan during the third quarter of the year. The contribution will be deductible at the company’s combined 2017 federal and state tax rate of 38%.

Weyerhaeuser also said its US pension plan assets will be transitioned to an allocation that will more closely match the plan’s liability profile in the future.

“We are committed to maintaining financially secure pension benefits for our pension plan participants,” Weyerhaeuser CEO Doyle Simons said in a release. “These actions will position us to better manage future pension plan costs while maintaining continued benefits security.”

The company expects to record one-time non-cash pension settlement charges on completion of the lump-sum offer and annuity purchase, with amounts to be determined when each transaction is concluded. Last week, Weyerhaeuser’s board of directors approved to raise its dividend 6.3% from the previous quarter to $0.34 per share.

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Home > News > Asset Allocation > Rhode Island Pension Returns 1.51% in July, 7.8% for Year
Asset Allocation

Rhode Island Pension Returns 1.51% in July, 7.8% for Year

Fund adds $125 million to reach $8.4 billion, beats benchmarks.

By Michael Katz

Rhode Island’s pension fund investments returned 1.51% in July, ahead of its benchmark’s return of 1.31%, and raising its total asset value by $125 million to more than $8.4 billion.

Rhode Island General Treasurer Seth Magaziner said the performance was driven by low-fee index fund investments in the global stock market.

The state’s pension fund returns have outpaced the benchmark over the past one-, three-, five-, and 10-year periods. For the 12-month period ending July 31, the fund returned 7.8%, compared to 7.2% for its benchmark, and 6.2% for a hypothetical fund comprised of 60% stocks and 40% bonds. And over the past three years, the fund has an annualized return of 6.68%, versus the benchmark return of 6.34%, and the 6.06% return earned by a 60/40 portfolio.

For the five-year period, the fund earned an annualized return of 6.95%, compared to the benchmark return of 6.71%, and a 60/40 fund, which had a 6.41% return. And over the past 10 years, the fund has returned 6.0% annually, compared to 5.8% for its benchmark, and 5.7% for a 60/40 fund.

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The asset allocation for the fund is roughly 55.1% in growth, 37.1% in stability, and 7.5% in income. The growth asset class has approximately 25% in US equities, 16.7% in international developed equities, and 5.3% in emerging market equities. The income asset class is made up of liquid credit (4.3%), high-yield infrastructure (2.0%), and private credit (1.2%). And the stability asset class has 11.0% in investment-grade fixed income, 6.5% in absolute return, 5.1% in core real estate, 3.8% in long-duration Treasuries, 3.6% in systematic trend following, 3.0% in cash, 2.4% in Treasury inflation-protected securities, and 1.7% in private infrastructure.

 

 

 

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