US-based The Timken has signed an agreement to buy a group annuity from The Prudential Insurance Company of America.
The Timken is purchasing the group annuity to pay future pension benefits to its 5,000 retirees in the US.
The annuity purchase is expected to reduce The Timken’s gross pension liability by around $600m, when finalized.
The company will fund the purchase through its existing plan assets, and is said to incur a non-cash pension settlement charge of about $220m in the first quarter.
Prudential will start paying benefits to certain retirees and surviving beneficiaries currently receiving payments from The Timken’s retirement plan, in April.
Timken noted that group annuity contract includes an irrevocable commitment by Prudential to make annuity payments to affected retirees covered under the contract.
State Street Global Advisors acted as independent fiduciary in the selection process of the insurance company, said Timken.
Prudential Retirement is a business unit of The Prudential Insurance Company of America (PICA), and Prudential Retirement Insurance and Annuity Company (PRIAC).
It provides a variety of products and strategies, including institutional investment and income products, pension risk transfer solutions and structured settlement services.