RockTenn Corp. hopes to reduce its defined benefit obligations by $200 million-$300 million by offering lump-sum payments to former employees who have yet to retire.
The Norcross, Georgia-based manufacturer of packaging solutions said about 9,000 of its former workers will be eligible.
They'll have until Aug. 5 to make a decision. RockTenn's estimated savings to overall pension liabilities comes from experiences other sponsors have had issuing lump-sum payments.
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Distributions will be made from the company's three DB plans in the fourth quarter, and are not expected to materially change the funding status of any of the plans.
According to RockTenn's 2013 annual report, the unfunded liability for the company's "qualified and supplemental executive retirement defined benefit pension plans" was about $1 billion.
"We will likely be required to make significant cash contributions to these plans under applicable U.S. and Canadian laws over the next several years in order to meet future funding requirements and satisfy current service obligations under the plans," said the report.
"These contributions will significantly impact future cash flows that might otherwise be available for repayment of debt, capital expenditures, and other corporate purposes."
RockTenn was one of about 65 signatories — most were sponsors of single-employer pensions – to a letter sent to several senators this May, urging the lawmakers to "protect these job-creators, workers and their retirement security by opposing any efforts to further increase premiums paid to the Pension Benefit Guaranty Corporation."
RockTenn also participates in the several multi-employer pension plans, according to its annual report.
The report said the company believes "that certain of the MEPPs in which we participate have material unfunded vested benefits."
In a statement, RockTenn's CFO said the company expects to offer a similar lump-sum payout to eligible employees in its hourly-worker pension plan later this year.
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