Weyerhaeuser Reveals Plans to Reduce Pension Liabilities

The company will offer a lump-sum distribution window to certain participants and transfer certain retiree assets to a group annuity.

Weyerhaeuser Company announced actions to reduce the liabilities of its U.S. pension plan.

First, Weyerhaeuser will offer select U.S. pension plan participants the opportunity to elect an immediate lump sum distribution. Distributions to those who elect to receive a lump sum will be paid from plan assets during the fourth quarter of 2018.

Following the lump sum distributions, Weyerhaeuser intends to transfer a portion of its U.S. pension assets and liabilities to an insurance company through the purchase of a group annuity contract. As part of the purchase, the insurer will assume responsibility for annuity administration and benefit payments to select retirees. This transaction would also be funded with plan assets and would be expected to close in 2019.

The company currently expects the lump sum and group annuity transactions will reduce the pension liabilities of its U.S. plan by approximately 30% and reduce the number of plan participants and beneficiaries by approximately 50%.

To maintain the plan’s current funded status in connection with these transactions, the company intends to contribute approximately $300 million (or approximately $186 million after-tax) to its U.S. pension plan during the third quarter of 2018. This contribution will be deductible at the company’s combined 2017 federal and state tax rate of 38%. Additionally, Weyerhaeuser’s U.S. pension plan assets will be transitioned to an allocation that will more closely match the plan’s liability profile going forward.

“We are committed to maintaining financially secure pension benefits for our pension plan participants,” says Doyle R. Simons, president and chief executive officer. “These actions will position us to better manage future pension plan costs while maintaining continued benefits security. Additionally, we will benefit from favorable tax treatment on our pension contribution.”

Recently LIMRA Secure Retirement Institute (LIMRA SRI) reported strong growth in pension risk transfer transactions, mostly due to large pension buy-out contracts, and it expects the pension risk market to exceed $23 billion in 2018.