Kimberly-Clark Corp. is offering about 10,000 former employees who are eligible for but not yet receiving monthly pension benefits the opportunity to convert their future annuity to a lump-sum benefit.
The Dallas-based company said Oct. 24 that the vested benefit obligation associated with the former employees is about $570 million, equal to 15 percent of the company's benefit obligation for the pension plan.
Participants will have until Nov. 21 to make the election. The lump sum payments will be funded from plan assets and will be made by the end of 2012.
Roughly a dozen other big well-known employers have made annuity-to-lump-sum benefit conversion offers in recent months, including Equifax Inc., Ford Motor Co., General Motors Co., NCR Corp. and The New York Times Co.
When pension plan participants take lump-sum benefits and are no longer covered by the plan, their former employers do not have to worry about how interest rate fluctuations and investment results could affect how much they will have to contribute to their pension plans to fund future annuity payments.
In addition, when participants take lump sums and move out of a pension plan, employers can reduce certain fixed costs, such as the payment of sharply rising premiums to the Pension Benefit Guaranty Corp.
For more information on lump-sum offers and other pension de-risking strategies, go to Business Insurance's solution arc on what companies need to know about reducing pension risk.