JCPenney has completed a transfer of pension risk to annuities provider Athene Holdings that ensures the bankrupt retailer’s retired employees will continue to receive their benefits.
Under the terms of the deal, JCPenney transferred $2.8 billion in pension obligations for roughly 30,000 participants in its pension plan to Athene, which agreed to provide annuity benefits to those participants.
The deal completes the termination of JCPenney’s plan as it prepares to emerge from Chapter 11 bankruptcy.
“Rather than face benefit reductions amid the company’s restructuring activity, the retirees covered by this transaction can be confident they will receive the same pension benefit, on the same schedule, as what they currently receive, or expected to receive in the future,” Sean Brennan, EVP of pension risk transfer and flow reinsurance at Athene, said in a news release.
As Reuters reports, Apollo Global Management, the private equity firm that controls Athene, “is seeking to profit by earning a higher return on investing the [JCPenney] pension assets than its payouts to the retirees will be.”
JC Penney filed for bankruptcy in May 2020 after the COVID-19 pandemic forced it to temporarily close its then nearly 850 stores. The Pension Benefit Guaranty Corporation took responsibility for the pension plan in November but also allowed the retailer to explore alternatives that would avoid cuts to retiree benefits.
According to November PBGC estimates, the plan was 92% funded with $3.3 billion in assets and $3.6 billion in benefit liabilities. The company’s most recent 10-K filing in January 2020 indicates that the plan had $3.5 billion in assets and $3.2 billion in liabilities and was 120% funded.
Athene’s wholly-owned subsidiaries Athene Annuity and Life Company and Athene Annuity & Life Assurance Company of New York have each committed to issuing a group annuity contract to JCPenney and individual annuity certificates to eligible participants.
“We wanted to find a better solution for our pension plan participants than [a] distressed termination,” said Steve Whaley, chair of the JCPenney’s Benefit Plan Investment Committee.