Verizon (NYSE: VZ ) is seeking retirement help -- or, more specifically, help for its retirees. Yesterday, Big Red announced plans to transfer $7.5 billion of its $30 billion in pension obligations to The Prudential Insurance Company, which will take over management of the assets.
Verizon froze its pension plan in 2005 to better manage its balance sheet. And yet, even with no new accruals over the past seven years, tens of thousands of employees are still due benefits. Prudential will now be responsible for handling payments to roughly 41,000 retirees.
Importantly, Verizon isn't reducing benefits or payments. Instead, the company is purchasing an irrevocable group annuity contract, from which Prudential will pay workers what they're owed, Verizon said in a press release.
Historically, pension transfers have been linked to bankruptcy proceedings. When United Airlines, predecessor to United Continental (NYSE: UAL ) , went bust in 2005, it canceled its pension plan and transferred responsibility to the federal Pension Benefit Guaranty Corporation, or PBGC.
Verizon is taking a more proactive approach, similar in scope to what General Motors (NYSE: GM ) did over the summer. GM settled $26 billion in pension obligations via lump sum payments and purchases of Prudential annuities, The Associated Press reports.