Unisys wins $152M Pentagon deal, seeks IRS relief for $115M in pension payments
Cheap money is usually a good thing for business. But Unisys is asking for relief from the IRS, arguing that low rates makes it harder to fund its old pension plans.
/arc-anglerfish-arc2-prod-pmn.s3.amazonaws.com/public/YK3NWVVF4VB7PFFDEPE6UQ2C64.jpg)
With U.S. interest rates and bond returns falling, Blue Bell-based Unisys Corp. has asked the IRS to let the company defer $115 million in contributions to its old pension plans next year.
Instead, Unisys wants to spread that pension contribution over the next five years.
“Our waiver application seeks to defer a portion of the 2020 contribution spike in our U.S. pension cash contributions while still fulfilling our pension obligations,” Mike Thomson, Unisys chief financial officer, said in a statement.
The company has estimated that a 1% drop in U.S. interest rates boosts its required contribution by $80 million each year. Federal Reserve rates have dropped by about one-quarter of 1% since July, and President Donald Trump has urged the Federal Reserve to cut rates more in an attempt to keep the economy growing as exports fall.
The move would have no effect on Unisys pensioners’ checks, but would allow the computer services company to avoid harsh financial alternatives, such as selling assets or borrowing money to raise the cash.
Unisys, formed in 1986 by the merger of the former Burroughs Corp. and Sperry Univac, is among the shrunken U.S. companies stuck with large pension obligations from when it employed more people. The company had estimated its 2020 U.S. qualified defined-benefit plan liability at $249 million next year, a large payment for a company whose annual revenues are under $3 billion. Future contributions range around $200 million a year from 2021 through 2024 and decline after that.
Separately, Unisys said it has won a U.S. Defense Information Systems Agency contract for up to five years, worth up to $152 million, “to support its Joint Service Provider program for the secure management and maintenance of the Department of Defense IT infrastructure" to standardize and protect military access to “mission-critical” servers, storage and applications.