October 19, 2012
--- The low interest rate environment made it the right
time for Verizon to transfer some pension risk, a company spokesman told PLANADVISER. ---
“The reason we
decided to do the pension transfer is because it will increase our long-term
financial strength and allow us to better focus on our core business of building
and managing communications networks,” he said. “At the same time it ensures
that these pension obligations remain in safe and trusted hands.”
Peggy McDonald,
senior vice president and actuary at Prudential Retirement—the company which
signed an agreement with Verizon Communications Inc. to transfer approximately
$7.5 billion of the Verizon Management Pension Plan obligations to Prudential
(see “Verizon Signs Partial Pension Buyout Deal”)—said
that is the common desire of the plan sponsors it is working with, “to focus
more attention on their core business and less on the business of managing
pension risk, while keeping their promise to provide retirement security to
plan participants.”
McDonald told PLANADVISER
that Prudential has more pension risk transfers in the pipeline “from a
wide variety of plan sponsors—from small to jumbo in terms of size, from many
different industries and from both active and frozen plans.”
As
far as the timing of the deal, the Verizon spokesman said the company has been
evaluating for a while ways to better understand, manage and predict its
long-term pension costs. “Given that the Federal Reserve has indicated interest
rates will remain low into 2015, the timing was right to remove some of our
risks associated with this volatility,” he said.