The company, which calls itself AstraZeneca US, late last month sent 7,000 workers and retirees at its U.S-based research and manufacturing locations a notice of intent to terminate the plan March 31. The company employs 14,000 workers in the U.S., but it locked new hires out of the plan in 2000 and froze all new benefit accruals in late 2017, according to U.S. Labor Department data.
The drugmaker’s decision could signal movement among pharmaceutical firms and insurance companies that have held onto their traditional pensions as other companies exit in droves, according to Willis Towers Watson Plc data. Overall, the total number of U.S. defined-benefit plans has declined by 73% since 1986, as major corporate giants switch to cheaper, less risky 401(k)s.
A brief funding respite last year led many plans to consider shedding the risk of future economic uncertainty by buying out participants or selling assets to an insurer—a process called “de-risking.”
AstraZeneca said Friday that it too will transfer its assets to an insurance company.
“On January 25, 2022, AstraZeneca informed participants of its qualified U.S. Defined Benefit Pension Plan that it is beginning a transition, which involves transferring the responsibility for payments, recordkeeping and asset management to a qualified, carefully selected insurance company with expertise in the long-term management of pension benefits,” the company said in a statement. “This is a common practice, achieved via a process known as ‘plan termination’ and ‘buy-out.’ This action does not impact any participant’s eligibility to receive the benefit earned under the Pension Plan.”
The American unit’s U.K.-based corporate parent, AstraZeneca Plc, collaborated with Oxford University in early 2020 to develop a Covid-19 vaccine that’s easier to store and distribute than its main U.S. rivals,
The company’s stock surged in November following an announcement that it would begin profiting from its vaccine development and rollout.
The AstraZeneca US pension plan has maintained a nearly fully funded status since it froze benefit accruals in 2017. The plan was 80% funded at the end of 2017 and jumped to 99.19% funding at the end of 2018, according to annual Labor Department disclosure data. The company reduced its carryover cost of maintaining the plan by more than $15 million.
The plan maintained 6,741 participants at the end of 2020, the most recent Form 5500 AstraZeneca filed. Nearly one in 10 participants are retired or former workers with vested benefits. About 700 current AstraZeneca US employees still participate in the plan.
Most AstraZeneca workers participate in a $6.4 billion 401(k)-style plan that added nearly 1,000 new participants last year, according to its own Form 5500 data.