JCPenney Offloads $2.8 Billion in Pension Liabilities

JCPenney has completed a transfer of pension risk to annuities supplier Athene Holdings that ensures the bankrupt retailer’s retired personnel will proceed to obtain their added benefits.

Underneath the conditions of the deal, JCPenney transferred $2.8 billion in pension obligations for approximately thirty,000 members in its pension strategy to Athene, which agreed to deliver annuity added benefits to all those members.

The deal completes the termination of JCPenney’s strategy as it prepares to emerge from Chapter eleven personal bankruptcy.

“Rather than encounter advantage reductions amid the company’s restructuring activity, the retirees coated by this transaction can be self-confident they will obtain the very same pension advantage, on the very same plan, as what they at the moment obtain, or envisioned to obtain in the long term,” Sean Brennan, EVP of pension risk transfer and stream reinsurance at Athene, claimed in a news release.

As Reuters experiences, Apollo World Administration, the personal fairness organization that controls Athene, “is trying to get to income by earning a increased return on investing the [JCPenney] pension belongings than its payouts to the retirees will be.”

JC Penney submitted for personal bankruptcy in Might 2020 after the COVID-19 pandemic forced it to briefly near its then just about 850 retailers. The Pension Profit Guaranty Company took obligation for the pension strategy in November but also authorized the retailer to explore alternate options that would keep away from cuts to retiree added benefits.

In accordance to November PBGC estimates, the strategy was ninety two% funded with $three.three billion in belongings and $three.six billion in advantage liabilities. The company’s most recent ten-K filing in January 2020 indicates that the strategy experienced $three.five billion in belongings and $three.2 billion in liabilities and was one hundred twenty% funded.

Athene’s wholly-owned subsidiaries Athene Annuity and Lifetime Enterprise and Athene Annuity & Lifetime Assurance Enterprise of New York have every dedicated to issuing a group annuity contract to JCPenney and personal annuity certificates to suitable members.

“We needed to find a improved solution for our pension strategy members than [a] distressed termination,” claimed Steve Whaley, chair of the JCPenney’s Profit Plan Investment Committee.

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