Many DuPont retirees are receiving letters announcing the purchase of a group annuity contract – an insurance product. The annuity benefit payments under this contract will be administered by insurance giant Prudential.
Corteva issued the following: As disclosed in Corteva’s 3Q22 10Q the company transferred obligations and assets from the US pension plan to purchase a group annuity in August 2022 for a portion of the pensioner population. This change in the pension plan has no impact on the pension benefit amount.
Annuities pay out a fixed amount each month, like the prior Corteva-DuPont pension. Prudential will pay future annuity benefits under the group annuity contract and payments will begin on January 1, 2023.
The change had been widely expected after Corteva ended up with DuPont’s retirement obligations after the merger and spinoff of Dow and DuPont. The main goal was the formation of Corteva, which combined the agribusiness operations of Dow and DuPont.
Following shareholder unhappiness with Corteva’s performance, its board brought in a new CEO, a former Canadian fertilizer company executive, who launched a cost-cutting program that will reduce the company’s headcount and an array of businesses in seed production, crop protection, and related areas. The company has made two acquisitions in biologicals, a category of crop protection that uses naturally derived technologies that can include beneficial insects.
Corteva also moved its headquarters from Chestnut Run, just outside Wilmington, to Indianapolis.
Like many long-time companies, DuPont had an underfunded pension plan but added money to shore the plan up in conjunction with the Corteva spinoff. DuPont ended a fixed pension plan more than a decade ago for newer employees and uses a 401(k) plan that matches employee contributions. Many retirees use a combination of the two to pay expenses.
The annuity does appear to close the door on the cost of living increases for retirees. Such increases have been a rarity in most private pension plans, but have led to calls for such increases due to the recent run-up in inflation.
The end of the fixed pension in much of corporate America has been blamed for a retirement savings gap, since employees can choose not to participate in 401(ks) or can make minimal contributions. Companies, in some cases, have cut back on the percentage of salary they match.
The rationale for saddling Corteva with pension obligations was the potential for the company to grow faster than DuPont, which has been paring down operations and now describes itself as a materials company.