McKesson to Close Long-Frozen US DB Plan

McKesson Corp.’s 10-K filing with the SEC revealed that the company will end its US defined benefit pension plan.

The decision to terminate the medical supply company’s pension plan was voted on by the board last week. Accruals for the retirement benefit obligations had been frozen since the end of 1996. That plan is 69.1% funded. As of March 31, its discount rate was 3.69%, up 30 basis points from 2017.

Although it has been closed for more than 20 years, the plan will not be officially closed until the second half of 2020 when all “regulatory requirements” are met. Beneficiaries will be able to receive their pensions by choosing either lump-sum distributions or annuity contracts with a third-party insurer.

McKesson’s current US plan assets are allocated to 18.2% equities, 66.9% fixed income (including cash and cash equivalents), and 3.3% real estate. Target allocations as of March 31 were 26% equities, 45% fixed income, and 4% real estate, according to the 10-K.

The company also said it would contribute $55 million to its global pension plans in fiscal 2019, but did not say how it would divide the money between US and non-US plans.

McKesson’s non-US plans are in Canada, Germany, Norway, and the UK. That pension division is 66.4% funded. It currently allocates 23.6% to equities, 62.9% to fixed income, and 12.8% in an undisclosed “other” category. The remaining 0.7% is in cash/cash equivalents and real estate.

McKesson currently has $60.3 billion total assets under management.