3M Announces Transfer of 23,000 Retirees to Insurer

The transaction will remove $2.5 billion in pension liabilities from the company's books.

Plan sponsor 3M announced on Thursday that it would offload pension liabilities for 23,000 retirees in its employee retirement income plan to annuity provider Metropolitan Tower Life Insurance Company.

The transaction, worth $2.5 billion of the St. Paul, Minnesota-based manufacturing and consumer company’s liabilities and related plan assets, will cover 60% of the retirees in the company’s defined benefit plan. Met Tower Life will assume responsibility for making liability payments to retirees on October 1. 

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

According to the company’s Form 5500 for plan year 2022, the 3M Employee Retirement Income Plan had 61,500 participants, and roughly $14 billion in assets. An annual SEC filing reveals that the company’s U.S. pension plan had a funded status of 94% at the end of 2023. 

In January, the company announced that it would freeze its pension plan. The freeze will take effect in December 2028. In 2009, the company stopped enrolling new employees into the plan. 

The 3M lift-out is only one of several large transactions announced this year, as more and more plan sponsors determine what to do with funding surpluses in their plans. In May, most corporate pensions had more assets than liabilities in their plans, with many firms who track the funded status of corporate plans finding that an overwhelming number have a funded status of over 100%. 

A period of higher interest rates and strong equity returns drove the funded status surplus that many plans are enjoying. Megadeals announced this year include Verizon’s $5.9 billion pension risk transfer with Prudential and RGA Reinsurance and Shell’s $4.9 billion transaction with Prudential. 

According to insurance research organization LIMRA, single-premium PRT sales reached a high of $14.6 billion in the first quarter of 2024, across 146 contracts. 

Metropolitan Tower, based in Lincoln, Nebraska, is a subsidiary of MetLife Inc.

$8M Repayment of Excess SFA Money Coming From Illinois Multiemployer Pension

The refund is the second such settlement related to overpayment of Special Financial Assistance due to the inclusion of deceased participants.

The Graphic Communications National Pension Fund, formerly the GCC/IBT National Pension Fund, has agreed to a settlement to repay more than $8 million in excess funds it received under the Pension Benefit Guaranty Corporation’s Special Financial Assistance Program. The fund was also required to pay 2.25% in annual interest on that amount starting from May 14.

In April 2022, the PBGC approved the application submitted to the SFA program by the Carol Stream, Illinois-based pension fund, which covers 31,715 participants in the printing industry. Approximately $1.29 billion in special financial assistance was given to the plan, which had been projected to run out of money in 2022. In December 2022, the PBGC announced it would provide the fund with an additional $227.1 million, raising its total SFA distribution to the fund to more than $1.5 billion.

Get more!  Sign up for PLANSPONSOR newsletters.

The PBGC said that without the SFA assistance, the plan would have been required to reduce its participants’ benefits to the PBGC guarantee levels if it became insolvent, which would have been approximately 15% below the benefits payable under the terms of the plan.

Under the terms of the SFA program, applicants are required to provide documentation of an independent death audit to identify deceased participants. The U.S. Department of Justice said that the Graphic Communications National Pension Fund’s census erroneously included approximately 371 deceased participants.

The error was spotted during an audit conducted by the PBGC’s Office of Inspector General, which determined that the $1.5 billion in funding was overstated by approximately $8 million. The Justice Department said the pension fund cooperated with its investigation and assisted with the actuarial analyses needed to calculate and validate the amount of the excess funds.

“I commend the NPF for its cooperation with the government’s efforts to identify and quantify excess SFA Program funds, as well as its prompt repayment,” Principal Deputy Assistant Attorney General Brian Boynton, head of the Department of Justice’s Civil Division said in a statement.

The PBGC added that it is working with other multiemployer pension plans to facilitate return of excess funds that were allotted based on inaccurate census data.

It is the second settlement involving a pension plan returning excess SFA funds received from the PBGC. In April, The Central States, Southeast and Southwest Areas Pension Plan reached a settlement with the Justice Department to repay approximately $126.6 million in overpayment the pension received from an assistance program. The fund was also required to pay 2.25% in annual interest.

«