Giant Food Reaches Settlement Agreement on FELRA and MAP Pension Liabilities; No Impact to Previously Issued 2020 Financial O...
01 Janvier 2021 - 4:05PM
Zaandam, the Netherlands, January 1, 2021 – Ahold Delhaize
today announces the conclusion of negotiations by its U.S.
subsidiary, Giant Food, regarding certain of its multi-employer
pension plans.
Giant Food, UFCW Locals 27 and 400 (collectively the “Union
Locals”) and the Pension Benefit Guaranty Corporation (“PBGC”) have
reached an agreement on Giant Food’s funding obligations with
respect to two multi-employer pension plans: the Food Employers
Labor Relations Association and United Food and Commercial Workers
Pension Fund (“FELRA”) and the Mid-Atlantic UFCW and Participating
Employers Pension Fund (“MAP”). As a result of this agreement, the
PBGC has approved the combining of MAP into FELRA (the “Combined
Plan”) and has agreed to provide financial assistance to the
Combined Plan following its insolvency, which is currently
projected to occur in 2022. The agreement is intended to resolve
all of Giant Food’s existing liabilities with respect to the FELRA
and MAP Plans and improves the security of pension benefits for
associates as well as reduces financial risk for Giant Food. Giant
Food will invest approximately $800 million (~€650 million) into
pension benefits for associates as part of this agreement. The
pension-related investments announced by Ahold Delhaize during the
course of 2020 - including those of National, 1500, and today’s
announcement - have greatly reduced Ahold Delhaize’s financial
exposure to the multi-employer pension plans of its U.S. brands,
Giant Food and Stop & Shop, and were achieved without impacting
the 2020 financial outlook due to the strong financial performance
in the year-to-date, through Q3 2020 at Ahold Delhaize.
This agreement will not impact Ahold Delhaize’s previously
issued financial guidance for 2020 and is also not expected to have
a material impact on Ahold Delhaize’s free cash flows or underlying
financial results beyond 2020. Further, this statement should not
be interpreted as an update to any component of the previously
issued 2020 outlook, announced in the Q3 2020 earnings
release.
The agreement consists of the following components:
- Following the combination of FELRA and MAP, the PBGC will
provide financial assistance to the Combined Plan to fund benefit
payments up to the level guaranteed by the PBGC. Giant Food will
pay the withdrawal liability to the Combined Plan in monthly
installments, commencing in February 2021 for the next 25
years.
- Giant Food will create a new single employer plan to cover
benefits accrued by Giant Food associates under the Combined Plan
that exceed the PBGC’s guarantee level following the Combined
Plan’s insolvency (“excess benefits”).
- Giant Food will create a new multi-employer plan with Safeway
to provide excess benefits for certain other participants in the
Combined Plan for whom Giant Food previously assumed
responsibility. Giant Food intends to exercise its option to
withdraw from this plan, which is currently estimated to be
approximately $10 million (€8 million) in total, at some point
during the next few years.
Each of the above plans is a frozen plan, meaning that no
further benefits will be accrued. With this agreement, Giant Food
has significantly de-risked its pension exposure and has improved
the security of pension benefits for plan participants. The above
plans, in essence, remain defined benefit plans, as referred to in
the ‘How we manage risk’ section of the 2019 Ahold Delhaize Annual
Report for related risk factors for pension and other
post-employment benefits.
As part of establishing these plans, Giant Food will record an
approximately $800 million (~€650 million) pension-related
liability, with a corresponding reduction in the Ahold Delhaize
FELRA and MAP multi-employer plan off-balance sheet liabilities.
This pension-related liability will be recorded as a non-cash,
pre-tax charge to pension expense, which will impact Q4 2020 IFRS
results. This charge will be excluded from underlying
results and will therefore not impact the previously issued
underlying operating results outlook for 2020. On an after-tax
basis, the charge amounts to approximately $554 million (~€450
million).
Giant Food will also make contributions to a new variable
annuity pension plan (“VAP”) for future service benefits for Giant
Food associates who are represented by UFCW Locals 27 and 400. The
VAP as well as the above plans are designed to protect benefit
accrual of participants, with a significantly reduced risk of plan
underfunding and improved visibility on annual contributions.
Overall, the total ongoing annual contributions to settle the
Combined Plan and for the newly created plans are not expected to
impact Ahold Delhaize’s underlying financial results going forward.
The total impact to underlying net income does not differ
materially to the impact from contribution amounts that have been
in place for the previous plans, which totaled $37 million (€33
million) in 2019.
Ahold Delhaize’s full year 2020 free cash flow outlook, as well
as future free cash flows beyond 2020, are not expected to be
materially impacted by these agreements.
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