MONTREAL – BCE Inc. says it will apply $750 million of its year-end 2012 cash balance towards a voluntary contribution to Bell Canada's defined benefit pension plan. It's making the move to "further improve the funded status of the plan and reduce the amount of Bell's future pension obligation."
"Accelerating the funding of Bell's future pension obligation is an efficient use of our cash given the backdrop of a persistently low interest rate environment," said Siim Vanaselja, Chief Financial Officer of BCE and Bell Canada. "With this contribution, which preserves the pension plan's funded status at a high level, we expect Bell's normal pension funding and cash income taxes for 2013 to be maintained at a similar level to 2012. This action both de-risks the pension plan and improves Bell's longer term financial flexibility to enhance returns to our shareholders through reduced future pension funding requirements and expense."
The voluntary contribution will be funded from cash on hand at the end of 2012. As the pension pre-payment is fully tax deductible, cash tax savings of approximately $200 million will be realized early in 2013. Bell says the net pension plan financing cost will also benefit from the stronger valuation position of the plan, contributing to higher annual net earnings of approximately $0.02 per share beginning in 2013.
