IBM to take $2.7 bln charge related to transfer of pension obligations

IBM said on Wednesday it expects a pre-tax charge of nearly $2.7 billion in the third quarter, related to a transaction involving the transfer of some of its pension plan obligations to a unit of Prudential Financial.

Under the deal, nearly $6 billion of IBM's defined benefit pension obligations will be transferred to Prudential Insurance Company of America.

A defined benefit plan guarantees a specific payout to employees upon retirement, completely funded by the employer without any contribution from the employee.

The one-time non-cash charge will not impact its third quarter, full-year 2024 adjusted operating profit or free cash flow, IBM said.

The deal stipulates that, starting next year, Prudential will take full responsibility for paying out the pension benefits of nearly 32,000 participants enrolled in IBM's plan.

https://www.reuters.com/technology/ibm-take-27-bln-charge-related-transfer-pension-obligations-2024-09-11/

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https://pensionrights.org/resource/what-happens-when-a-pension-is-transferred-to-an-insurance-company/

my pension would now be guaranteed by my "State"... ??

What happens if you move to a different state?

Retired since 2012, received letter in mail yesterday indicating as of 1/1/25 my pension will now come from Prudential. It also indicated that my pension would now be guaranteed by my "State"... ??
Knowing how poorly "My State" is run, this part has me greatly concerned if Prudential has some sort of issue.

This is nothing more than IBM tapping an overfunded retirement plan. It goes hand in hand with the RBA announcement. IBM’s CFO is just cleaning up the balance sheet. The real question to ask is why are they cleaning up the balance sheet? I suspect they will merge sometime in the future with a non-competitor and become the “enterprise” division of that company

It makes sense: IBM isn’t in the business of managing pension funds so they unload that responsibility to someone else.
IBM used to be differentiated from the rest of the industry by having its own pension; not anymore

IBM is 60 billion dollars in debt and "cash on hand" is a misleading term https://www.indeed.com/career-advice/career-development/cash-on-hand

"Typically, business owners consider any asset they can liquidate into cash in 90 days or fewer as cash on hand."

That's not cash, it's a YARD SALE.

A lot of Wall Street is like this now, more debt than assets.

The 2023 "pension" plan was to keep the 401k money they were paying out and count it towards cash on hand, thus boosting free cash flow. Or that's my theory. Any money they don't give you to put in your 401k stays with IBM and enhances their financial position.

@cld

It's as crooked an act as the introduction of RBA Savings garbage that Big Blue execs were peddling in 2023. Only fools would ever think that plan was a good investment for the long term.

It's called "de-risking" and it is a way for desperate companies to save money while sc--wing over those holding a pension.

My condolences to the tens of thousands of hard-working IBMers who (back in the day) built this once-great company into the biggest and best, and the best place to work.

Hard to imagine that now but IBM was once what Apple plus Microsoft is today.

Essentially IBM paid Prudential to take on your owed pension obligation. (defined benefit) The obligation is now on Prudentials books and off of IBM’s books Your pension checks will start coming from Prudential vs IBM come Jan of 2025. NOTE if IBM goes bankrupt or gets bought, you will see no impact as Prudential now has the money and obligation. Also note if prudential goes belly up, you are at risk

I've received nothing (yet) from IBM. I'm part of the group NOT sold off last yesr. what does this mean, exactly?

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IBM to take $2.7 bln charge related to transfer of pension obligations

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