IBM to take $2.7 billion charge related to transfer of pension obligations

(Reuters) – IBM (IBM) said on Wednesday it expects a pre-tax charge of nearly $2.7 billion in the third quarter, related to a transaction involving the transfer of some of its pension plan obligations to a unit of Prudential Financial.

Under the deal, nearly $6 billion of IBM’s defined benefit pension obligations will be transferred to Prudential Insurance Company of America.

A defined benefit plan guarantees a specific payout to employees upon retirement, completely funded by the employer without any contribution from the employee.

The one-time non-cash charge will not impact its third quarter, full-year 2024 adjusted operating profit or free cash flow, IBM said.

The deal stipulates that, starting next year, Prudential will take full responsibility for paying out the pension benefits of nearly 32,000 participants enrolled in IBM’s plan.

(Reporting by Juby Babu in Mexico City and Harshita Mary Varghese in Bengaluru; Editing by Alan Barona)