Thread regarding IBM layoffs

IBM to Post $5.9 Billion Pension-Transfer Charge in Third Quarter

https://www.bloomberg.com/news/articles/2022-09-13/ibm-says-it-will-report-5-9-billion-charge-in-pension-agreement

By: Brody Ford and Max Reyes
September 13, 2022 at 4:12 PM CDT

International Business Machines Corp. said it would report a $5.9 billion one-time pretax charge in the third quarter as a result of an agreement to offload pension obligations to two life insurers.

IBM and its pension plan administrator said the purchase of annuities from Prudential Financial Inc. and MetLife Inc. will transfer about $16 billion in pension obligations that cover about 100,000 participants and their beneficiaries. The annuities were funded directly by the assets of the pension plan and required no cash or asset contributions from IBM, the company said Tuesday in a regulatory filing.

The agreement is called a pension risk transfer. IBM, by buying annuities from the insurance companies, makes Prudential and MetLife responsible for paying the pension obligations. Insurers have been seeking out pension-transfer agreements in recent years as a way to accrue assets for investment. The popularity of the deals is also driven by employers that are looking to offload the long-term obligations.

IBM, in a blog post, said it has “taken actions over the last several years to reduce the risk profile of its worldwide retirement-related plans, while at the same time increasing the funded status of the plans.”

IBM said the charge will not affect its third-quarter or full-year operating profit or free cash flow.

by Anonymous
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Post ID: @OP+1iIQd9TS
Comment! It's anonymous!

9 replies (most recent on top)

You need to ask why would AK dump pension obligations and restructure retiree obligations. It’s to take risk out of owning IBM. That means steady predictable cash flow. Sure sounds like late 1970’s / early 1980’s business model. That doesn’t mean he has hit upon a growth initiative, but it does mean he has stabilized IBM’s cash flow. If the Redhat / enterprise strategy pans out, he’ll be a genius, if it doesn’t he’ll have restored IBM to the widows and orphans stock. Either way he wins

by Anonymous
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Post ID: @5lqk+1iIQd9TS

Notice the word "Updates" .. if this were a good thing, IBM would be shouting that from the mountaintop. Instead, you get the ominous "Updates" term.

by Anonymous
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Post ID: @4nzj+1iIQd9TS

Not only is IBM dumping Pension obligations, but they are also changing retirement benefits to the already retired. Can the folks impacted let us know “good, bad, push” It sure appears like AK is taking a longer term view to reduce IBM’s going forward obligations

https://newsroom.ibm.com/IBM-Updates-Benefits-Program-for-IBMers-and-Retirees

by Anonymous
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Post ID: @4nzi+1iIQd9TS

The rise in interest rates, and IBM’s over funding made this transaction inevitable. This should improve IBM’s financial outlook and thus lower IBM’s borrowing costs. It should also lower IBM’s federal pension insurance payments. Net net this was a financial engineering transaction and should be viewed thru those eyes. As far as putting the risk on retirees, ask yourself who is going to go broke first? IBM or the 2 largest insurance companies in the world? I believe the insurance companies have far more experience in managing long term risk vs IBM

by Anonymous
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Post ID: @1pia+1iIQd9TS

At least if some insurance company has it, IBM can steal it back (like many companies have done).

by Anonymous
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Post ID: @1yrz+1iIQd9TS

More info. and details --
https://hrportal.ehr.com/ibm/Home/overview

by Anonymous
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Post ID: @1tnf+1iIQd9TS

You can be sure that this benefits IBM at the expense of pensioners. This is called "de-risking" which removes the risk from the company, but onto the recipients. Is pure evil and shocking that it is even legal. Let the new lawsuits begin!

by Anonymous
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Post ID: @fmm+1iIQd9TS

Now the pensions will likely not be covered by the Pension Benefit Guarantee Board. If they go out of business, etc. the pensions could be gone.

by Anonymous
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Post ID: @ohr+1iIQd9TS

So does anyone know how this transaction will be booked? IBM has stated that its USA pension obligations are 107% funded and its Europe pension obligations are 103%. Does IBM benefit by selling these off via being able to pocket the overfunding?

by Anonymous
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Post ID: @lqk+1iIQd9TS

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