Prudential Insurance to take over JC Penney pension

The good news is J C Penney management has taken a major step towards resolving that thorny issue as the company announced on Friday it was reducing its $5 billion pension obligations by around a third through a lump-sum offer to participants and a new deal with Prudential to manage employee pensions. The company has in the past bought out employees’ pension plans and offered early retirement. This strategy has become all the more lucrative for those businesses, which face increasing costs from a multitude of factors, including regulatory obligations.

Moreover, around 1,900 previous representatives who have conceded vested advantages chosen to get protuberance wholes. About 25,000 of those participants elected to take the lump sum, and the company made a total of $439 million in payments in December 2012.

Meanwhile, the retailer struck a deal with Prudential by which J.C. Penney will transfer a portion of its obligations and assets to Prudential. Prudential also will assume financial responsibility for making the annuity payments as provided in the group annuity contract.

The 113-year-old retailer is part of a growing list of companies rethinking their pension plans.

The Texas-based midrange merchandiser joins other companies that recently have been unloading future pension liabilities to insurers seeking to boost their assets.

We rate PENNEY (J C) CO (JCP) a SELL. “These actions not only continue to provide excellent benefit security for our retirees, but also further the objective of de-risking the plan while improving the company’s long-term risk profile”. They surged 7.12% to close at $9.93 per share.