Company Undertakes Pension Risk Transfer to Help Strengthen Our Balance Sheet

March 7, 2024

Our Commitment to Reducing Pension Plan Risk

One of the benefits to working at and retiring from FirstEnergy is the company’s pension plan. All FirstEnergy employees continue to participate in our defined pension plan, including newly hired employees. 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. One 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 1,000 U.S. pension plans undertook this type of transaction over the last five years.

During the recent FirstEnergy Live event, our President and CEO Brian Tierney discussed the various strategic steps the company has been taking to improve our financial position. One of these steps is undergoing a pension risk transfer (PRT), also known as a pension lift-out. This transfer helps us manage the overall risk to the pension trust and control costs while ensuring the security of retirees’ pension benefits.

FirstEnergy has fully funded the pension benefit obligation transferred to Banner Life Insurance Company, a subsidiary of Legal & General America, and RGA Reinsurance Company. As part of the PRT, we have agreed to purchase a group annuity contract with Banner Life Insurance Company and RGA for approximately 2,200 retirees of our former competitive generation subsidiaries, including FirstEnergy Solutions, FirstEnergy Nuclear Operating Company and FirstEnergy Generation.  This PRT does not include or have any effect on current FirstEnergy employees.

Here are some essential things to know:

  • Impacted retirees were notified of the change in January and will be contacted by Banner Life in early March.
  • Banner Life will be the administrator of the benefits and the primary point of contact for annuity payment questions beginning March 5, 2024.
  • The value of a retiree’s pension benefit will not be affected, and monthly payments will continue automatically and uninterrupted based on the current direct deposit or paper check payment method.

The administrative transfer to Banner Life will happen automatically without any action needed from the retirees.

Insurance companies selected after careful review

The Plan’s fiduciary committee and its advisors went through a thorough process and followed the fiduciary standards set forth under ERISA, the federal law that governs pension plans. In addition, the U.S. Department of Labor guides the purchase of annuities for pension plans. These guidelines require, among other things, that fiduciaries analyze the criteria applicable to identifying the “safest available annuity” while also factoring in such issues as customer service, insurance company financial ratings, experience, and insurance company reputation.

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