Lincoln Electric To Purchase Group Annuity Contract For Retiree Pension Benefits

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The Lincoln Electric Company ("Lincoln Electric," "Company"), a subsidiary of Lincoln Electric Holdings, Inc.
LECO
, today announced that it has entered into an agreement to purchase a group annuity contract from The Principal Financial Group ("The Principal") to settle $425 million of Lincoln Electric's approximate $900 million in outstanding U.S. pension obligations. Under the agreement, The Principal will assume the obligation to pay future pension benefits starting November 1, 2015, for specified U.S. retirees and surviving beneficiaries who retired on or before June 1, 2015 and are currently receiving payments from Lincoln Electric's U.S. Retirement Annuity Program (RAP). Lincoln Electric has been committed to meeting its pension obligation responsibly. The Company has contributed $375 million to its pension plans over the last ten years and its U.S. pension plans are fully funded. The purchase of this group annuity contract allows the Company to secure pension benefits for its approximate 1,900 retirees, reduce volatility in pension costs and funding requirements, while maintaining a fully-funded plan for the remaining retiree obligations. The Principal was chosen by the RAP fiduciary with the advice of an independent expert after a rigorous evaluation process that reviewed several factors including financial strength, rating of the insurance company, plan administration and customer service capabilities. The annuity purchase will not impact the monthly pension benefits Lincoln Electric retirees and surviving beneficiaries receive today. The group annuity contract includes an irrevocable commitment by The Principal to make annuity payments to affected retirees covered under the contract. Lincoln Electric is notifying by mail those individuals who are affected by the forthcoming change and will provide a customer service number to address any questions that affected retirees may have. Once finalized, this annuity purchase is expected to reduce Lincoln Electric's U.S. pension obligation by approximately $425 million, or 47 percent. The purchase will be funded by existing plan assets and requires no cash contribution. The Company expects to incur a non-cash pension settlement charge of approximately $132 million in the third quarter.
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