Pension settlements announced by Sears, New York Times

Chalk up two more significant employers who are moving to distance themselves from future DB responsibilities, moves some suggest are based in part on new guidance issued by the IRS.

In separate announcements made last week, both the New York Times Company and Sears Holdings said they would be offering their former employees lump-sum settlements of pension benefits - decisions which will help considerably reduce their pension liabilities and provide a more positive economic outlook for both.

The moves follow recent decisions by automakers Ford and General Motors to offer one-time lump-sum payouts to retirees to reduce years of future pension liability.

The New York Times' deal is aimed at over 5,200 participants in its already terminated DB plan, whose total financial holdings equal approximately 15 percent of the company's nearly $2 billion pension liability.

The employees will have between Sept. 24 and Nov. 2 to make a decision to continue receiving pension checks or take a one-time payout, the newspaper reports.  

Sears has opted to put an additional $203 million into its pension plan, which will bring the plan's funded status above 80 percent and thereby qualify for lump-sum payouts without penalties or restrictions. The money comes above and beyond an initial plan to contribute $314 in pension contributions in 2012.

Sears' DB plan was valued at approximately $4.1 billion earlier this year and was only funded at approximately 66 percent.

Industry analysts say the move comes just as the IRS has issued new policy guidance regarding the discount rates employers can use to calculate lump-sum offerings. That higher rate instead lowers the current value of the pension liability, and makes it a good time for many companies to consider making an offer to their retirees and pre-retirees, aided indirectly by continuing low interest rates.

Longer periods of low interest rates will likely continue the current trend of low returns for pension plan investments and continue to drive up liabilities in the future.


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