If shareholders sign off on the merger between H.G. Heinz Co. and Kraft Foods Group, it would mean the union of more than $13 billion in defined benefit and defined contribution retirement assets.
Kraft has the larger retirement plans of the two, by far.
As of the end of 2014, Kraft, which has 22,000 employees, projected its defined benefit pension obligation to be $8.3 billion. Its plans held about $7.2 billion in assets, making for a $1.1 billion unfunded liability, according the company’s Securities and Exchange Commission filings.
That liability was up dramatically from $271 million at the end of 2013, which the company said was largely owed to a 70-basis point decrease in its discount rate.
In the U.S., salaried and non-union hourly Kraft employees hired before 2009 are eligible for the plan, but in Kraft’s 2014 filing, the company said it will freeze its pension plans at the end of 2019 (and at the end of 2023 for Canadian workers).
This year, the company plans to contribute about $195 million to its defined benefit pension plans, while it expects to pay out about $401 million in pension benefits; it projects that about $5 billion will be paid out by 2024.
Kraft is counting on its plans returning 5.75 percent in 2015. In 2013, the plans began moving forward with a liability-driven investment strategy, shifting weight to fixed income, with the ultimate aim of shifting 80 percent of assets into fixed income, according to filings with the SEC.
Kraft Foods Thrift Plan, its defined contribution plan, held about $4.5 billion in assets in 2013, up marginally from the prior year, according to the company’s SEC documents.
The company kicked in about $56 million to the plan in 2013, while participants contributed about $92 million. About $778 million in distributions were made in 2013. The plan reported about $4.8 million in “general and administrative” expenses.
Participants are automatically enrolled at a 3 percent deferral rate, with automatic annual increases of 1 percent, which the plan caps once 6 percent of salary is deferred.
For its part, Heinz has about $767 million in U.S. defined benefit plans and about $669 million in U.S. defined contribution plans.
In February 2013, the company was bought by Berkshire Hathaway and 3G Capital Management for about $28 billion, considered at the time to be the largest acquisition in the food industry, according to CNBC.com.
After the sale, the company announced several pension de-risking schemes, including plan consolidations, lump-sum offers to the non-retirees in its defined benefit plans, and an annuity purchase.
The merger, if OK’d, would create a stable of household names — everything from Heinz ketchup to Jell-O — with revenue of about $28 billion.