McCormick to pay out $60 million in annuities-to-lump-sum conversion plan
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McCormick & Co. Inc. said it will pay out about $60 million to former employees eligible for but not yet receiving monthly pension benefits who opted for a company program to convert their future annuities to a lump-sum benefit.
The company, as part of its second quarter earnings statement released last week, said the offer was “successful,” though it did not disclose how many of the 3,300 eligible participants accepted the offer. A spokesman declined to provide information beyond what was publicly disclosed.
“The objective of this program was to reduce future pension plan volatility and administration,” the Sparks, Md.-based spice company said in its earnings statement.
At the end of 2012, McCormick's U.S. pension program had a deficit of $215.4 million, with assets of $519.8 million and benefit obligations of $735.2 million, according to its 2012 10-K report.
Numerous other big employers also have made annuity-to-lump-sum benefit conversion offers since 2012 including Equifax Inc., Ford Motor Co., General Motors Co., NCR Corp. and The New York Times Co.
When pension plan participants take lump-sum benefits and no longer are covered by the plan, their former employers do not have to worry about how interest rate fluctuations and investment results could affect how much they will have to contribute to their pension plans to fund future annuity payments.
In addition, when participants take lump sums and move out of a pension plan, employers can reduce certain fixed costs, such as the payment of sharply rising premiums to the Pension Benefit Guaranty Corp.
