IBM sees one-time non-cash pre-tax pension settlement charge of $2.7B in Q3

In a regulatory filing, IBM (IBM) disclosed that, On September 5, 2024, IBM and State Street (STT) Global Advisors Trust Company, as independent fiduciary of the IBM Personal Pension Plan, entered into a commitment agreement with The Prudential Insurance Company of America (PRU) under which the Plan will purchase a nonparticipating single premium group annuity contract that will transfer to Prudential approximately $6B of the Plan’s defined benefit pension obligations related to certain pension benefits that began to be paid prior to 2016. The purchase of the group annuity contract closed on September 11, 2024. The contract covers approximately 32,000 Plan participants and beneficiaries. Under the group annuity contract, Prudential has made an irrevocable commitment, and will be solely responsible, to pay the pension benefits of each Transferred Participant that are due on and after January 1, 2025. The transaction will result in no changes to the amount of benefits payable to the Transferred Participants. The purchase of the group annuity contract was funded directly by assets of the Plan and required no cash contribution from the company. As a result of the transaction, the company expects to recognize a one-time non-cash pre-tax pension settlement charge of approximately $2.7B ($2B net of tax) in the third quarter of 2024. The actual charge will depend on finalization of the actuarial and other assumptions. The pre-tax charge was not included in the GAAP forward-looking information released on July 24, 2024. This charge will not impact the company’s third quarter or full year 2024 operating profit or free cash flow.