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Baxter to shed $2.4B pension plan liabilities via Prudential Insurance deal

Prudential Insurance Co. of America and Baxter International Inc. signed an agreement under which the former will take on $2.4 billion of pension plan liabilities from the latter.

Baxter International will purchase a nonparticipating single premium group annuity contract from the Prudential Financial Inc. subsidiary. Also, it will transfer the future benefit obligations and annuity administration for certain retirees and beneficiaries under the pension plan, namely previous employees who were already in pay status as of Jan. 1, 2019.

The pension benefit obligations for approximately 17,200 participants will be transferred to the insurer after the premium has been paid to Prudential Insurance.

The group annuity contract purchase is anticipated to be completed by Oct. 11, subject to customary closing conditions, including certain termination clauses. Prudential is expected to assume responsibility for plan payments after Dec. 31.

Baxter expects to recognize a noncash pension settlement charge of approximately $750 million — $565 million, or $1.09 per share, on an after-tax basis — as a special item in the fourth quarter.

State Street Global Advisors Trust Co. was also involved in the transaction, acting solely in its capacity as the independent fiduciary of the Baxter International pension plan.