IBM will take on $2.7 billion in charges related to the transfer of pension liabilities

(Reuters) – IBM ( IBM ) said on Wednesday it expects a pre-tax charge of nearly $2.7 billion in the third quarter related to a transaction involving the transfer of some of its pension liabilities to a unit of Prudential Financial.

Under the deal, nearly $6 billion of IBM’s defined benefit pension obligations will be transferred to Prudential Insurance Company of America.

A defined benefit plan guarantees a specific payment to employees at retirement, funded entirely by the employer, with no contribution from the employee.

The one-time non-cash charge will not affect third-quarter, full-year 2024 adjusted operating profit or free cash flow, IBM said.

The agreement states that starting next year, Prudential will assume full responsibility for paying the pension of nearly 32,000 participants enrolled in IBM’s plan.

(Reporting by Juby Babu in Mexico City and Harshita Mary Varghese in Bengaluru; Editing by Alan Barona)