Analyzing Footnote Disclosure of Pension Buy-out In a press release dated December 3, 2018, Bristol Myers Squibb disclosed the following with respec to its pension plans (excerpted). NEW YORK (BUSINESS WIRE) Bristol-Myers Squibb Company (NYSE: BMY) today announced it will transfer $3.8 billion of U.S. pension obligations through a full termination of its U.S. Retirement Income Plan. The obligations will be distributed through a combination of lump sums to Plan participants who elect such payments, and the purchase of a group annuity contract from Athene Annuity and Life Company, for all remaining liabilities. The Plan includes approximately 4,800 active employees, 1,400 retirees and their beneficiaries receiving benefits, and 18,000 prior Bristol-Myers Squibb employees who have not yet initiated their benefits. Current Plan provisions, benefit payment options and in-pay benefits will remain available for all participants. Upon closing of this transaction in the third quarter of 2019, the Company expects a noncash pre-tax pension settlement charge of approximately $1.5 billion-$2 billion. Required a. Why would the company engage in such a transaction? To limit future cash flow for the pension plan b. What are the two payout options available to the company's employees, retirees, and prior employees?
Analyzing Footnote Disclosure of Pension Buy-out In a press release dated December 3, 2018, Bristol Myers Squibb disclosed the following with respec to its pension plans (excerpted). NEW YORK (BUSINESS WIRE) Bristol-Myers Squibb Company (NYSE: BMY) today announced it will transfer $3.8 billion of U.S. pension obligations through a full termination of its U.S. Retirement Income Plan. The obligations will be distributed through a combination of lump sums to Plan participants who elect such payments, and the purchase of a group annuity contract from Athene Annuity and Life Company, for all remaining liabilities. The Plan includes approximately 4,800 active employees, 1,400 retirees and their beneficiaries receiving benefits, and 18,000 prior Bristol-Myers Squibb employees who have not yet initiated their benefits. Current Plan provisions, benefit payment options and in-pay benefits will remain available for all participants. Upon closing of this transaction in the third quarter of 2019, the Company expects a noncash pre-tax pension settlement charge of approximately $1.5 billion-$2 billion. Required a. Why would the company engage in such a transaction? To limit future cash flow for the pension plan b. What are the two payout options available to the company's employees, retirees, and prior employees?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Analyzing Footnote Disclosure of Pension Buy-out
In a press release dated December 3, 2018, Bristol Myers Squibb disclosed the following with respect
to its pension plans (excerpted).
NEW YORK (BUSINESS WIRE) Bristol-Myers Squibb Company (NYSE: BMY) today announced
it will transfer $3.8 billion of U.S. pension obligations through a full termination of its
U.S. Retirement Income Plan. The obligations will be distributed through a combination of lump
sums to Plan participants who elect such payments, and the purchase of a group annuity contract
from Athene Annuity and Life Company, for all remaining liabilities.
The Plan includes approximately 4,800 active employees, 1,400 retirees and their beneficiaries
receiving benefits, and 18,000 prior Bristol-Myers Squibb employees who have not yet
initiated their benefits. Current Plan provisions, benefit payment options and in-pay benefits will
remain available for all participants.
Upon closing of this transaction in the third quarter of 2019, the Company expects a noncash
pre-tax pension settlement charge of approximately $1.5 billion-$2 billion.
Required
a. Why would the company engage in such a transaction?
To limit future cash flow for the pension plan
b. What are the two payout options available to the company's employees, retirees, and prior employees?
Transcribed Image Text:b. What are the two payout options available to the company's employees, retirees, and prior employees?
One-time cash lump sum payment
Yes
Retirement annuity paid by Bristol Myers Squibb
No
Retirement annuity paid by the life insurance company Yes
Choose the current plan
No
Payout option?
Check
0
:
0 ✓
C
C.At December 31, 2018, Bristol Myers Squibb reported a funded status of $163 million on its balance sheet. What will be the net funded status at December
31, 2019?
For this question, assume the $163 million relate solely to the U.S. Retirement income Plan.
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