IBM announces a significant pension plan transfer to Prudential Financial, resulting in a $2.7 billion pre-tax charge. Learn more about the details of the transaction and its impact on IBM's financial position.
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| IBM streamlines its operations by transferring pension obligations to Prudential. Discover how this move will benefit IBM's financial flexibility and focus on core business. Symbolic image |
Armonk, New York, USA - September 12, 2024:
IBM announced on Wednesday that it would incur a pre-tax charge of approximately $2.7 billion in the third quarter due to a transaction involving the transfer of some of its pension plan obligations to Prudential Financial.
The deal, which is expected to be finalized in the fourth quarter, will see IBM transfer nearly $6 billion of its defined benefit pension obligations to Prudential Insurance Company of America. This move aims to reduce IBM's long-term financial commitments and improve its overall financial flexibility.
Defined benefit pension plans guarantee a specific payout to employees upon retirement, funded entirely by the employer. By transferring these obligations to Prudential, IBM will no longer be responsible for managing and funding these plans.
While the transaction will result in a one-time non-cash charge, IBM emphasized that it will not have any impact on its third-quarter or full-year 2024 adjusted operating profit or free cash flow. The company expects the deal to provide it with significant financial benefits in the long run.
Starting in 2025, Prudential will assume full responsibility for paying out the pension benefits of nearly 32,000 participants enrolled in IBM's plan. This transfer of obligations will relieve IBM of the financial burden associated with these pension plans.
This transaction marks a significant step for IBM as it continues to focus on its core business and strategic initiatives. By reducing its exposure to pension plan liabilities, IBM can allocate its resources more effectively and pursue growth opportunities.