Motorola Solutions is transferring $US3.1 billion ($A3.35 billion) in pension obligations to a leading insurer, aiming to reduce the risk on its balance sheet.
The deal, the third-largest of its kind, is expected to close by the end of 2014. With control of the funds, Prudential Insurance Co of America will pay the monthly pensions of about 30,000 eligible former US employees who started receiving pension payments in 2013. Monthly benefits will not change, Motorola Solutions said.
Motorola Solutions said it also plans to offer lump-sum payments to ex-employees who haven't yet started getting benefits in exchange for them forgoing traditional pension payments. The amount of the lump sum will depend on the eligible former employee's length of service, and it will range from "very small numbers" to $US1 million, a spokesman said.
Motorola Solutions will retain responsibility for paying the pensions of up to 40,000 current and former workers. The communications technology company said a bond sale in August will allow it to infuse $US1.1 billion into its US pension plan in 2014, $US800 million more than it projected at the beginning of the year. The bond sale and the Prudential deal should lower its pension obligations by 50 per cent, from $US8.4 billion today to $US4.2 billion, the spokesman said.
The Motorola Solutions plan will remain about 80 per cent funded.
"We're taking very aggressive action here to deal with a large legacy issue, our outsized pension obligation," Motorola Solutions' corporate vice president and treasurer Rob O'Keef said in an interview.
Motorola Solutions has significantly downsized over the past two decades - from 150,000 employees in 1997 to 20,000 employees today. About 5,000 more will spin off to Zebra Technologies when the sale of Motorola Solutions' enterprise unit closes this year.
Revenue has also dropped, from about $US40 billion to closer to $US8 billion.
"And we're still carrying the legacy pension obligations of all those businesses we've divested," O'Keef said.
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