The Timken Co. of Canton, Ohio, has completed the purchase of a group annuity contract to pay future benefits for about 5,000 U.S. salaried retirees.
The annuity, according to the company, will reduce the company’s gross pension liability by about $600 million.
The global manufacturer of bearings said the annuity, purchased from Prudential Insurance Co. of America, will begin paying benefits in April.
The annuity was funded by existing plan assets and did not require a cash contribution from the company, but Timken will incur a noncash pension settlement charge of approximately $220 million in the first quarter.
The company said that over the past 10 years it has contributed almost $2 billion to its global pension plans, and that its U.S. plans are fully funded. After the annuity purchase, the balance of the Timken U.S. plans are expected to remain fully funded.
The purchase comes in the wake of a split in the company into the Timken Co. and TimkenSteel.
The company said the annuity purchase will have no impact on the monthly pension benefits Timken retirees and surviving beneficiaries are already receiving. “The group annuity contract includes an irrevocable commitment by Prudential to make annuity payments to affected retirees covered under the contract,” it said.
Individuals affected by the change are being notified by mail.