Company Takes Another Step to Reduce Pension Plan Risk
December 13, 2018
One of the benefits to working at and retiring from FirstEnergy is the company’s pension plan. While most companies no longer provide their employees with a defined benefit pension plan, FirstEnergy continues to make significant investments in our plan. In fact, we contributed $1.25 billion to the pension fund in early 2018.
It’s important that as we manage the overall pension trust, we continue to look for ways to control costs and reduce risks associated with managing a pension plan. Several design and administrative changes over the past few years have done just that. For example, since 2014, new hires participate in a cash balance design; and in 2015 we began offering a voluntary lump-sum payment option to terminated vested employees with pension benefit amounts below a certain dollar value.
Another common approach to controlling costs – while reducing risks and assuring payments – involves the transfer of pension payments to an insurer through the purchase of an annuity contract. In fact, more than 500 U.S. pension plans undertook this type of transaction in 2017. After a comprehensive evaluation by an independent annuity expert, the FirstEnergy Investment Committee – which is responsible for making fiduciary decisions for the Pension Plan — decided to purchase an annuity for certain retirees, their surviving beneficiaries and alternate payees who receive relatively small monthly pension payments from the Pension Plan.
What Is Changing
For these participants, the amount of their pension payments is not changing, but the company providing the payments will change in 2019. FirstEnergy has fully funded the annuity contract and is transferring the pension administration and payment responsibilities of certain pension benefits to Western-Southern Life Assurance Company, a member of the Western & Southern Financial Group (Western & Southern). The new group annuity contract begins in January 2019. Per the terms of the contract, all promised monthly pension payments to covered retirees, beneficiaries and alternate payees are guaranteed by Western & Southern.
The agreement with Western & Southern is an irrevocable commitment to make monthly payments under the same payment terms that participants have under the Pension Plan.
Who Is Included
Participants were included in the annuity purchase based on the dollar value of their monthly pension benefit. These participants received a letter recently explaining the details of the transfer and assuring that the monthly payment will be the same amount and paid under the same terms as the benefit currently received under the Pension Plan.
No Additional Changes Planned
The Pension Plan is not considering making this change to any other pension plan participants at this time.
For More Information
View the FAQs that were sent to the participants included in the annuity purchase.
Anyone with questions about this change can contact the FirstEnergy Pension Center at Aon at 1-855-326-8167. Representatives are available from 9:00 a.m. to 5:00 p.m., Eastern Time, Monday through Friday.