Item 8.01 Other Events
On September 4, 2019, the Company’s Board of Directors approved the termination of the Trinity Industries, Inc. Consolidated Pension Plan (f/k/a the Trinity Industries, Inc. Standard Pension Plan), a tax-qualified defined benefit plan (the “Plan”), effective December 31, 2019. All other pension plans administered by the Company were merged into the Plan, effective July 31, 2019. Consequently, upon completion of the termination of the Plan and the related actions described below, the Company will no longer have any remaining funded pension plan obligations.
In addition, the Board of Directors authorized the Company to take the following steps over the next several months to prepare for the termination of the Plan, including:
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prepare and execute any necessary Plan amendments and/or restatements regarding the Plan termination, including amending the Plan to provide for a limited lump-sum window for eligible participants;
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prepare and file an Application for Determination for Terminating Plan with the Internal Revenue Service (“IRS”) for a determination as to the tax-qualified status of the Plan at the time of termination; and
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prepare and file all appropriate notices and documents related to the Plan’s termination and wind-down with the Pension Benefit Guaranty Corporation, the U.S. Department of Labor, the IRS, the trustee, and any other appropriate parties.
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Except for retirees currently receiving payments under the Plan, participants will have the choice of receiving a single lump sum payment or an annuity from a highly-rated insurance company that will pay and administer future benefit payments. The amount of any lump sum payment will equal the actuarial equivalent present value of the participant’s accrued benefit under the Plan as of the distribution date. Annuity payments to current retirees will continue under their current elections, but will be administered by the selected insurance company.
Under U.S. generally accepted accounting principles, the Plan is fully funded; however, after receiving required governmental approvals, and following completion of the limited lump-sum offering, the Company may be required to make an additional cash contribution to settle all of the Plan’s obligations. Management estimates that any such additional contribution will not exceed $25 million; however, the final amount of any such contribution is not known and will depend on interest rates, Plan asset returns, the lump-sum election rate, and other factors.
The Company expects to recognize pre-tax non-cash pension settlement charges totaling between $145 million and $195 million upon settlement of the Plan’s obligations. These charges include: (i) a non-cash charge for the recognition of all pre-tax actuarial losses accumulated in Accumulated Other Comprehensive Loss, which total approximately $140.4 million as of December 31, 2018 ($107.2 million net of related income taxes), and (ii) the potential $25 million additional cash contribution noted above. These charges are currently expected to occur between late 2020 and early 2021, with the specific timing and final amounts dependent upon completion of the activities enumerated above.
Forward-Looking Statements
Some statements in this report, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about the Company’s estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that the Company believes or anticipates will or may occur in the future. The Company uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date hereof, and the Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting the Company’s operations, markets, products, services and prices, and such forward-looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the most recent fiscal year, as may be revised and updated by the Company’s Quarterly Reports on Form 10-Q, and the Company’s Current Reports on Form 8-K.