The company, which calls itself AstraZeneca US, sent 7,000 workers and retirees at its US-based research and manufacturing sites late last month a letter of intent to end the plan by March 31. The company employs 14,000 workers in the U.S., but it newly suspended 2,000 workers from the plan and frozen all new pension benefits in late 2017, according to U.S. Labor Department data.
According to data from Willis Towers Watson Plc, the drugmaker’s decision could signal movement among drug and insurance companies that have stuck by their traditional pensions, while other companies are exiting in droves. Overall, the total number of U.S. defined benefit plans has declined 73% since 1986 as large corporate giants migrate to cheaper, less risky 401(k)s.
A brief pause in funding last year prompted many plans to remove the risk of future economic uncertainty by buying participants or selling assets to an insurer – a process known as “risk mitigation.”
AstraZeneca said Friday it would also transfer its assets to an insurance company.
“On January 25, 2022, AstraZeneca notified participants of its qualifying United States defined benefit pension plan that it is beginning a transition that will involve transferring responsibility for payments, records and asset management to a qualified, carefully selected insurance company with long-term experience of managing pension benefits,” the company said in a statement. “This is common practice, achieved through a process known as ‘plan termination’ and ‘buyout’. This action will not affect a participant’s eligibility to receive benefits earned under the retirement plan.”
The American entity’s UK-based parent, AstraZeneca Plc, worked with Oxford University in early 2020 to develop a Covid-19 vaccine that would be easier to stock and distribute than its main US competitors.
The company’s shares rose in November after an announcement that it would begin to benefit from its vaccine development and launch.
AstraZeneca’s US pension plan has maintained a near-fully funded status since the benefit freeze in 2017. The plan was 80% funded at the end of 2017 and increased to 99.19% at the end of 2018, according to annual disclosure data from the Department of Labor. The company reduced its transmission costs for maintaining the plan by more than $15 million.
The plan retained 6,741 participants at the end of 2020, the latest Form 5500 submitted by AstraZeneca. Almost every tenth participant is a pensioner or former employee with vested benefits. Approximately 700 current AstraZeneca US employees are still participating in the plan.
Most AstraZeneca employees participate in a $6.4 billion 401(k)-like plan that added nearly 1,000 new participants last year, according to its own data from the Form 5500.