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Article: A cost-saving masterstroke; Baker Hughes uses excess funding from acquired firms' pension plans to create cash balance plan, averting tax on surplus assets.(Pension Plans)
- Article from:
- Pensions & Investments
- Article date:
- March 19, 2007
- Author:
CopyrightCOPYRIGHT 2007 Crain Communications, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Byline: Jenna Gottlieb
HOUSTON - Overfunded defined benefit plans created an interesting dilemma for Baker Hughes Inc.
To protect a huge contribution holiday, the Houston-based company took the excess funding from six DB plans it picked up through acquisitions, placing those assets in a cash balance plan in 2002. The cash balance plan was created to implement a master trust structure, something few companies do, say consultants.
A master trust brings a company's separate pension plans under one umbrella for investment purposes. It doesn't merge benefits. By creating the cash balance plan, Baker Hughes saved paying an excise tax on recouping the ...