FedEx to purchase $6bn Group Annuity Contract from Metropolitan Life
FedEx has entered into an agreement with Metropolitan Life to purchase a group annuity contract and transfer approximately $6bn of the company’s U.S. pension plan obligations.
The transaction will transfer responsibility for pension benefits to Metropolitan Life for around 41,000 FedEx retirees and beneficiaries who currently receive a monthly benefit from participating FedEx tax-qualified U.S. domestic pension plans. There will be no change to the pension benefits for any plan participants as a result of the transaction.
In a statement issued on Tuesday (8 May), FedEx said that by transferring these obligations to Metropolitan Life it will reduce its US pension plan liabilities by around $6bn. The purchase of the group annuity contract will be funded directly by assets of the Pension Plans. Following the annuity purchase and transfer, the Pension Plans will remain well funded.
As a result of the transaction, FedEx expects to recognize a one-time non-cash pension settlement charge, which will be included in the fiscal 2018 year-end mark-to-market pension accounting adjustments that will be reported in the company’s fiscal 2018 fourth quarter earnings release.
During the 2017 and 2018 fiscal years, FedEx made voluntary contributions of $4.5 billion to the Pension Plans, including the most recent contribution of $1.5 billion following the U.S. Tax Cuts and Jobs Act, which was enacted in December 2017.
