Verizon Pension Risk Transfer Plan Explained

Verizon's pension risk transfer plan is a complex process that involves transferring the financial burden of its pension obligations to an insurance company.

The plan was announced in 2016, with the goal of reducing the company's pension liability by $7.5 billion.

This move was made possible by a unique arrangement with Prudential Financial, which agreed to take on the risk of paying out future pension benefits.

In exchange, Verizon received a lump sum payment of $7.5 billion, which it used to reduce its debt and improve its financial position.

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Verizon completed a $5.9 billion pension risk transfer by purchasing single-premium group annuity contracts with Prudential and RGA Reinsurance Co.

The group annuities will provide benefits to 56,000 Verizon retirees who began receiving payments before January 1, 2023.

Prudential and RGA each guaranteed and assumed 50% of the benefit obligation related to the transferred participants, except in certain jurisdictions where Prudential assumed 100% of the benefit obligation.

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State Street Global Advisors Trust Co. acted as the independent fiduciary of the Verizon Management Pension Plan and the Verizon Pension Plan for Associates.

Verizon made additional contributions of about $365 million to the pension plans prior to the transaction, which kept the funded ratio of each plan unchanged.

The aggregate amount of each participant's payment under the group annuity contracts was equal to the amount of each individual's payment under the pension funds.

In 2012, Verizon transferred $7.5 billion in pension obligations to Prudential.

Prudential was selected again for a second multi-billion dollar PRT transaction with Verizon in 2024.

The transaction was a testament to Prudential's financial strength and proven service experience.

Glenn O'Brien, Vice President, Sales, Prudential Retirement Strategies, emphasized the importance of delivering quality and seamless execution after the transaction.

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Verizon Communications Inc. completed a $5.9 billion pension risk transfer by purchasing single-premium group annuity contracts with two insurers covering 56,000 retirees.

The group annuities, from Prudential Insurance Co. of America and RGA Reinsurance Co., will provide benefits to retirees that began receiving payments from the Verizon pension plans before January 1, 2023.

Prudential and RGA each guaranteed and assumed the sole obligation to make future payments to the 56,000 transferred participants.

Direct payments from Prudential and RGA will begin on July 1, 2024, with each assuming 50% of the benefit obligation, except in certain jurisdictions where Prudential will assume 100% of the benefit obligation.

Verizon made additional contributions of about $365 million to the pension plans prior to the closing date of the transaction.

The aggregate amount of each participant's payment under the group annuity contracts will be equal to the amount of each individual's payment under the pension funds.

This recent transaction comes as the Department of Labor is overdue to release the results of its work to study and report on its findings about its Interpretive Bulletin 95-1.

Verizon previously transferred $7.5 billion in pension obligations to Prudential in 2012.

Verizon retirees are likely feeling a mix of emotions about the $5.9 billion pension risk transfer deal.

This deal means that a significant portion of their pension benefits will be taken over by a third-party insurance company.

Retirees may be worried about the security of their benefits, as they are no longer directly managed by Verizon.

The deal is expected to save Verizon around $5.9 billion in pension costs over the next 15 years.

The $5.9 billion savings is a significant chunk of change for any company, let alone one as large as Verizon.

Retirees may also be concerned about how this deal could impact their benefits in the long run.

The deal is expected to take effect in 2023, giving retirees a few years to adjust to the change.

Verizon retirees are not the only ones affected by this deal - it also impacts the company's financial health and future plans.