Weyerhaeuser Company recently announced they would be reducing the liabilities of its U.S. pension plan while maintaining the plan’s current funded status.
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. There will be no change to retirees’ pension benefits as a result of the group annuity transaction.
The company currently expects the lump sum and group annuity transactions will reduce the pension liabilities of its U.S. plan by approximately 30 per cent and reduce the number of plan participants and beneficiaries by approximately 50 per cent.
To maintain the plan’s current funded status in connection with these transactions, the company intends to contribute approximately US$300 million (or approximately US$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 per cent.
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,” said 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 favourable tax treatment on our pension contribution.”
Weyerhaeuser expects to record one-time non-cash pension settlement charges upon completion of the lump sum offer and annuity purchase, with amounts to be determined following the conclusion of each transaction.
