Kroger to Consolidate Pension Funds

CINCINNATI — Kroger Co. here said Thursday that it would merge four pension funds to which it contributes into a single fund, a move it said would save costs and reduce complexity.

“Given the challenging environment that exists for pension plans today, we are pleased to have reached an agreement that provides a meaningful future benefit for Kroger associates who participate in these plans," Mike Schlotman, Kroger's chief financial officer, said in a statement. "The unique characteristics of these plans, coupled with our strong financial position and today's low interest rate environment, give us the ability to contribute to the new fund in a manner that we expect to produce significant future savings."

The four funds cover more than 65,000 Kroger workers represented by 14 local unions of the United Food and Commercial Workers. Kroger employees comprise 92% of the active participants in the funds, which Kroger said was a key factor facilitating the arrangement. The initiative enables Kroger to cost-effectively fund its contributions by taking advantage of the current low interest-rate environment. The agreement also establishes a pension benefit formula through 2021, which concludes collective bargaining with the affected union on this subject for the next 10 years.

Pending market conditions, favorable discussions with the rating agencies and the approval of three remaining UFCW locals, Kroger expects to contribute approximately $650 million to the new fund in January. As a result, the company would incur a charge to earnings for the fourth quarter of 2011 of approximately 73 cents per share. On an after-tax basis, approximately $413 million would be needed to make this contribution. The exact effect on net earnings per diluted share will depend on the actual amount contributed.