Archer Daniels Midland Co. has disclosed that it will offer between 7,000 and 7,500 former employees who are eligible for but not yet receiving monthly pension benefits the opportunity to convert their future annuities to a lump-sum benefit.
The program, which will be funded with pension plan assets, "could reduce its global pension benefit obligation by approximately $140 million" to $210 million and improve its pension underfunding by about $35 million to $55 million, the Decatur, Illinois-based agribusiness giant said Sept. 20 in a filing with the U.S. Securities and Exchange Commission.
ADM's offer comes after one made this week by Van Buren Township, Michigan-based automotive industry supplier Visteon Corp. to about 10,000 former employees.
In addition, The New York Times Co. announced last week that it is making such an offer to about 5,200 plan participants.
Other well-known employers that also have made annuity to lump-sum benefit conversion offers in recent months include Ford Motor Co., General Motors Co. and NCR Corp.
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 the pension plan, employers can reduce certain fixed costs, such as the payment of sharply rising premiums to the Pension Benefit Guaranty Corp.
Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.
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