US Public Companies Continue to Bolster Pension Funds

At least half a dozen publicly traded companies reported significant recent and impending pension contributions in SEC filings over the month. Pension contributions and de-risking activities are expected to continue to increase over the year as companies take advantages of newly changed tax laws.

AbbVie Inc.

In its 10K SEC filing for the fiscal year ended December 31, 2017, pharmaceutical company AbbVie said it plans to make voluntary contributions to its various defined benefit plans “in excess of $750 million.”

It also reported that it made voluntary contributions to its principal domestic defined benefit plan of $150 million in 2017, 2016, and 2015, with total contributions of $246 million in 2017 and $273 million in 2016, respectively. 

“AbbVie’s assumed expected long-term rate of return has a significant effect on the amounts reported for defined benefit pension plans as of December 31, 2017, and will be used in the calculation of net periodic benefit cost in 2018,” said the company in its filing. “A one percentage point change in assumed expected long-term rate of return on plan assets would increase or decrease the net period benefit cost of these plans in 2018 by $54 million.”

CBS

In 2018, broadcaster CBS expects to make contributions of approximately $53 million to its non-qualified pension plans to satisfy the benefit payments due, according to its most recent annual report.

During the fourth quarter of 2017, CBS purchased a group annuity contract that reduced the company’s outstanding pension benefit obligation by approximately $800 million, representing about 20% of the total obligations of the company’s qualified pension plans. The annuity purchase was funded with pension plan assets.

In connection with the transaction, the company recorded a one-time accounting charge of $352 million in the fourth quarter of 2017, reflecting the accelerated recognition of a portion of unamortized actuarial losses in the plan. Also in the fourth quarter, the company made a discretionary contribution of $500 million to prefund its qualified plans.

As of Dec. 31, 2017, the asset allocation for CBS’ US pension plan trust, which accounted for 94% of total plan assets as of the end of 2017, was 71% in long-duration fixed income portfolios, 24% in equity investments, and the remainder in cash, cash equivalents, and other investments. Other trusts, which fund the company’s international pension plans, accounted for 6% of total plan.

Corning Inc.

Materials science company Corning said in its  10-K filing that although it is not subject to any mandatory contributions in 2018, it plans to make voluntary cash contributions of $105 million to its US qualified pension plan, and up to $27 million to its international pension plans this year. That is more than what the company has contributed to both plans over the past two years combined.

In 2017, Corning made no voluntary cash contributions to its domestic defined benefit pension plan, and $29 million to its international pension plans. During the previous year, the company made voluntary cash contributions of $73 million to the domestic defined benefit pension plan, and $16 million to its international pension plans.  

DowDupont

Although chemical companies E I Du Pont De Nemours, better known as DuPont, and Dow Chemical merged in August, the companies kept their defined benefit pension plans separate. Dow and DuPont have defined benefit pension plans in the US, and in several other countries.

According to the combined company’s 10-K filing, Dow contributed approximately $1.68 billion, $629 million, and $844 million to its pension plans in 2017, 2016, and 2015, respectively, including contributions to fund benefit payments for its non-qualified pension plans. Meanwhile, DuPont contributed $68 million post-merger to its pension plans, including contributions to fund benefit payments for its non-qualified pension plans.

In 2018, Dow expects to contribute approximately $500 million to its pension plans, and DuPont expects to contribute approximately $200 million to its funded pension plans other than the principal US pension plan, and its remaining plans with no plan assets. In a separate 10 K, DuPont said it does not expect to make any cash contributions to its US plan in 2018 after making $2.9 billion in contributions in 2017.

General Dynamics Corp.

“It is our policy to fund our defined-benefit retirement plans in a manner that optimizes the tax deductibility and contract recovery of contributions considered within our capital deployment framework,” said aerospace and defense company General Dynamics in its 10-K form for the fiscal year ended Dec. 31, 2017.

The company has seven noncontributory and five contributory trusteed, qualified defined-benefit pension plans covering eligible government business employees, and two noncontributory and four contributory plans covering eligible commercial business employees. It contributed $199 million to its pension plans in 2017, and its 2018 required contributions are approximately $315 million.

General Dynamics also contributed to its defined contribution funds $274 million in 2017, $261 million in 2016, and $240 million in 2015. The defined-contribution plans held approximately 21 million and 22 million shares of the company’s common stock, representing approximately 7% of its outstanding shares.

Huntington Ingalls

Military shipbuilder Huntington Ingalls reported in its 10-K filing for the fiscal year ended Dec. 31, 2017, that it made discretionary contributions to its qualified defined benefit pension plans of $294 million, $167 million, and $99 million in 2017, 2016, and 2015, respectively.

It said its pension plans were 89% funded as of the end of 2017, and expects its 2018 cash contributions to its qualified defined benefit pension plans will be $508 million, all of which will be discretionary.