Eastman Kodak Company has terminated its pension plan that covered approximately 35,000 participants, and is offering a new cash balance retirement plan for its roughly 4,000 current employees, the Rochester, N.Y.-based firm confirmed recently.
In November 2024, the company revealed in a regulatory filing it agreed to sell private-equity and other illiquid assets held by the pension plan (the plan’s assets were overfunded, resulting in a surplus of between $885 million and $975 million). The largest buyer, Mastercard Foundation, a philanthropic organization established by the credit card giant, agreed to purchase interests with a net asset value of $764.4 million, while four additional unnamed buyers agreed to purchase $87.3 million. With the proceeds, Kodak intends to pay down debt.
“The termination of our U.S. Kodak Retirement Income Plan and subsequent reversion of excess funds to pay down debt is progressing as planned,” said Kodak CFO David Bullwinkle said in an earnings press release on Aug. 11. “We expect to have a clear understanding by August 15 of how we will satisfy our obligations to all plan participants, and we anticipate completing the reversion by December of 2025.”
In a subsequent statement on Aug. 13 to counter “misleading” media reports that Kodak is ceasing operations, going out of business, or filing for bankruptcy, the company said it has been preparing for the pension plan termination for some time and expects to receive “approximately $500 million of assets—after meeting our obligations to all pension fund participants—in December 2025 when the transaction closes.” Approximately $300 million of the funds are expected to be cash, and approximately $200 million are expected to be investment assets that will be converted into cash.
Kodak currently has $477 million of term debt and $100 million of preferred stock outstanding and is required by its loan documents to use the $300 million of cash expected to be received in December to repay term debt, the Aug. 13 statement said.
The new plan
Kodak confirmed on its website (via its SEC Form 10-Q) that has replaced its defined benefit Kodak Retirement Income Plan with the new Kodak Cash Balance Plan, effective March 1, 2025 for new hires and April 1, 2025 for existing employees.
Current employees, as well as former employees who haven’t yet reached retirement, were to choose by Aug. 15, 2025 whether to receive the lump sum of their balance or an annuity once they retire, with the process for settling the remaining benefits expected to be completed by October 2025, when Kodak said it intends to purchase an annuity contract with an insurer for participants who elect to enroll in regular annuity payments.
Plan participants were not expected to see a change in the value of the benefits that have been promised to them, and the SEC filing said the benefits under the Kodak Cash Balance Plan are substantially the same as those under the cash balance feature of the defunct Kodak Retirement Income Plan.
A cash balance plan is a type of defined benefit plan where contributions are made by the employer, not the employee, typically based on a percentage (perhaps 5%) of the employee’s salary. The funds are pooled and professionally managed. Under this structure, employees do not have individual accounts, and their account balances are only hypothetical until they retire.
The account grows through the pay credits and interest credits (a set rate or tied to an index like Treasury yields). The employer guarantees growth (often between 4% and 5%) according to the formula.
Participants can’t select investments and can’t take out loans from the plan or early withdrawals. Payouts only happen at retirement and allow for participants to receive a lump sum or can move it into an annuity or other option.
SEE ALSO:
• 3M to Freeze U.S. Pension Plan in 2028 in Favor of 401(k)s
• A Smart Retirement Strategy for Business Owners Using Cash Balance Plans
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
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