The Prudential Insurance Company of America, a Prudential Financial, Inc. (PRU) subsidiary, has been roped in by Motorola Solutions, Inc. (MSI) to take care of its pension benefits.
Per the agreement, Prudential will look after the monthly pension benefits for the retirees of Motorola. The company will also offer the eligible employees an option to avail of lump-sum pension payments. Through these measures Motorola will reduce its pension obligation by $4.2 billion. For 2014, the company has an obligation to contribute $1.1 billion in cash toward its pension plan.
Prudential will manage pension benefits for 30,000 Motorola employees. The transaction will be completed by 2014 and Prudential will start making payments under this contract from 2015.
The agreement will also allow nearly 32,000 plan participants to go for lump-sum payment of their outstanding pension benefit. Participants eligible for this scheme would include only those who left the company before Jun 30, 2014 and have accrued a pension benefit but have not yet started receiving payments. Participants should apply for the scheme during the application period of Oct 2 to Nov 7, 2014.
The total payment can be a maximum of $1 billion. Prudential is a niche player in providing guarantee retirement benefits with more than 85 years of service and is looking after the pension benefits of 1.6 million participants in more than 5,700 companies.
Prudential carries a Zacks Rank # 3(Hold).
Better-ranked sector stocks within our coverage include Fortegra Financial Corporation (FRF) and MGIC Investment Corp. (MTG). Both these stocks carry a Zacks Rank #2 (Buy).
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