(Bloomberg) — Motorola Solutions Inc. plans to reduce its pension obligations by $4.2 billion as it transfers liabilities to Prudential Financial Inc. and offers some employees lump-sum payments.
Prudential, the No. 2 U.S. life insurer, will assume responsibility for future pension payments to about 30,000 Motorola Solutions retirees, the Schaumburg, Illinois-based maker of two-way radios and other communications equipment said today in a statement.
Employers with pension obligations are under pressure as persistently low interest rates make it more difficult to generate returns on money set aside for liabilities. General Motors Co. and Verizon Communications Inc. are among companies that have opted to buy annuity contracts from Newark, New Jersey-based Prudential.
“We have substantially reduced the funding volatility associated with our pension plans while protecting benefits for retirees,” Motorola Solutions Chief Financial Officer Gino Bonanotte said in the statement. “Our retirees’ benefits are not changing, just who provides them.”
Motorola Solutions will purchase a $3.1 billion group annuity contract from Prudential under which the insurer will pay and administer retiree pensions starting in early 2015, according to the statement. The electronics maker also said it intends to contribute $1.1 billion in cash to its U.S. pension plans this year.