In a recent news article published, FedEx to Purchase $6 Billion Group Annuity Contract from Metropolitan Life Insurance Company to Reduce Pension Obligations.
FedEx Corp., the United States-based company established in the year 1971 that is known for its service in transportation, and business solution, it has covered more than 220 countries and territories across the world. Frederick W. Smith was the founder and CEO of the company which was originally termed as Federal Express.
FedEx has recently started its alliance with an insurance company, so as to provide a secure future for their former or retired employees. It is a major decision for both company and for the employees, and will surely put them in benefits.
FedEx Corp. announced to purchase 6 billion dollars allowance contract on 8th of May, 2018. FedEx has step into concurrence with Metropolitan Life Insurance Company or Metropolitan Life to purchase a group contract and transfer a lump sum amount of $6 billion for the pension plan requirements of U.S companies.
With the transfer of asset to the life insurance company, there comes a responsibility for the pension benefits to the FedEx retires on the Metropolitan Life. For around 41,000 former employees will be benefited with this stride who meets the certain criteria and presently receive a monthly benefit from participating FedEx tax-qualified U.S. domestic pension plans.
There will be no modification to the pension benefits and participants would not be affected by this transaction. Metropolitan Life Insurance Company will continue to fulfil the payment procedure and the beneficiaries, retired participants will be informed regarding this service. The transaction closed on May 10, 2018.
Alan B. Graf, Jr., executive vice president and CFO, FedEx Corp, said that “FedEx is committed to maintaining financially secure pension benefits for our retirees and their beneficiaries”
He also added that the transaction will be helpful and beneficial for the retired employers of the company. FedEx will manage the forthcoming pension plan outlays so that the retirees will receive the same pension profit from a well-trusted insurance company. State Guaranty Association will make sure that the transferred pension is safely received by the retirees, irrespective of where they live.
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Reassigning these obligations to Metropolitan Life, FedEx will easily be able to diminish its U.S. pension plan accountabilities by up to Six billion dollars. The group annuity contract procurement will be funded directly by resources of the Pension Plans. The Pension Plans will remain well funded as per the decree of annuity purchase and transfer.
Following the transaction, it results in the company to expect that they will be familiar with a one-time non-cash pension settlement charge, which will be included in financial 2018
market pension accounting modifications which are to be stated in the company’s monetary 2018 fourth-quarter earnings release.
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In the duration between 2017 and 2018 economic years, FedEx made intended to contribute $4.5 billion to the Pension Plans, which includes the most current involvement of $1.5 billion ensuring the U.S. Tax Cuts and Jobs Act that was endorsed in December 2017.
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