The Markets October 7, 2016

United Technologies Announces Pension Buyout, Lump-Sum Window

The company expects the actions will reduce the overall size of its pension obligations by approximately $1.77 billion.
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Apparently deciding that pension annuitization would be less costly than maintaining its plans, United Technologies Corp. announced two actions that are expected to reduce the overall size of its pension obligations by approximately $1.77 billion.

First, United Technologies will transfer approximately $775 million of its outstanding pension benefit obligations under the UTC Employee Retirement Plan and the UTC Represented Employee Retirement Plan to The Prudential Insurance Company of America. This transaction is expected to close on October 12 with the purchase of a group annuity contract from Prudential.

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Prudential was selected in consultation with independent experts after a competitive bidding process. Prudential will assume the obligation and administrative responsibility for retirement benefits owed to approximately 36,000 United Technologies retirees and surviving beneficiaries who currently receive a benefit of $300 per month or less from the plans.

“This transaction is an important part of United Technologies’ long-term strategy to reduce future pension risk and expense. It will not affect participants remaining in the plans and entrusts the assets leaving the plans to a highly rated insurance company whose core business is retirement security and administration of pension benefits,” says Robin Diamonte, United Technologies’ Chief Investment Officer.

Second, United Technologies has also implemented a program offering certain former U.S. employees or beneficiaries with a vested pension benefit an option to take a one-time, lump sum distribution rather than future monthly pension payments. Upon completion of this program, United Technologies expects approximately 10,000 participants to take the lump-sum offer. Payments will be paid from the retirement plans during late 2016. This action is expected to reduce United Technologies’ pension benefit obligations by approximately $995 million by year-end 2016.

Together, these related actions are part of United Technologies’ overall plan to de-risk its pension plans and are expected to reduce the overall size of the company’s pension plans by approximately $1.77 billion. The transactions will not diminish the plans’ funded status and are not expected to materially impact future pension expense or to require additional contributions to the plans.

Because these actions accelerate the satisfaction of future pension obligations, United Technologies expects to recognize a one-time pre-tax pension settlement charge in the range of $400 million to $530 million in the fourth quarter of 2016. Willis Towers Watson served as the strategic adviser to United Technologies in these transactions.
Products October 7, 2016

Schwab Advisor Center Gets Upgraded

In addition to online support and guidance, the platform will feature various tools help advisers complete tasks and communicate with clients while reducing data-entry, paperwork, and room for error.
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Schwab Advisor Services has announced various enhancements to Schwab Advisor Center, the core custody and trading platform for independent advisers whose clients custody with Schwab.    

Updates include an online account open tool, which will guide advisers through the process, and enable them to send account applications to clients for electronic signature. By partnering with DocuSign, Schwab plans to expand eApproval capabilities to most transactions conducted via Schwab Advisor Center, including money movement and account maintenance. Users can also now use text-based authentication. Advisers who need to process a large number of e-singed forms can take advantage of bulk-downloading capabilities.

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A new electronic check deposit feature will be rolled out in 2017. It will allow advisers to scan and upload checks on behalf of their clients to Schwab Advisor Center. The tool will also allow advisers to upload batches of checks. Straight-through processing (STP) will ensure funds are deposited as quickly as possible into client accounts, the firm explains.

The announcement follows the release of the Schwab Advisor Services cybersecurity suite of tools.

“The adviser office is continuously changing as technology becomes an integrated and intuitive part of all facets of our lives,” says Ed Obuchowski, senior vice president of advisor technology solutions at Schwab Advisor Services. “Our vision is to empower advisers to conduct all routine business with Schwab securely online, digitizing their workflows at every opportunity, while also minimizing time-consuming activity like follow-ups on status over the phone. This will ultimately allow advisers to continue to achieve scale and efficiency in their operations and stay focused on the needs of their clients.”

Through Schwab Alliance, advisers can gather client authorization. They can also securely view and share client account information with authorized third parties such as legal counsel or accountants entirely online. Advisers can also securely submit requests or documents from their mobile phone or tablet. New tracking features allow firms to manage documentation and track the history of requests. Clients who call Schwab for account information can utilize voice verification.

In 2012, Schwab also released a suite of online investing tools for its retirement business.

The redesigned Schwab Advisor Center service guide now features predictive search and frequent search suggestions. The rating and comment features for article content has also been enhanced. Schwab Advisor Center is used by more than 40,000 independent advisers at more than 7,000 firms who custody more than $1 trillion in client assets with Schwab.

For more information, access the replay of Schwab Advisor Services’ recent webcast: What’s new: An overview of technology platform enhancements.

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