The Kroger Co. (NYSE:KR) announced its withdrawal from two multi-employer pension funds as the company seeks to improve the benefits for its employees, reduce administration costs and enhance prospects for returns.

Kroger

According to the supermarket and department store operator, it reached an agreement with the Washington Meat Industry Pension Trust and the Pace Industry Union-Management Pension Fund regarding its withdrawal, which is subject to the approval of the fund trustees and the Pension Benefit Guarantee Corporation.

Details of the pension fund changes

The Kroger Co. (NYSE:KR) said it will move the liability for pensions earned for the approximately 870 current and 840 retired employees covered by the Washington Meat Industry Pension Trust into the UFCW Consolidated Pension Fund established in December 2011. According to the supermarket and department store operator, the pension liabilities for its current associates’ future service will be earned in the Seattle-based Retirement Trust.

On the other hand, the approximately 350 King Soopers pharmacists covered by the Pace Industry Union Management Pension Fund will now participate in the Kroger-sponsored 401k plan with matching benefits.

Kroger to incur $56 million

The Kroger Co. (NYSE:KR) agreed to pay $56 million, after tax, to restructure the pension obligations. The amount will result as a charge to its earnings in the first quarter fiscal 2014.

“We are pleased to have reached agreements to help secure pension benefits that more than 2,000 associates have earned and to provide a future benefit that is competitive and affordable,” said Mike Schlotman, chief financial officer of Kroger Co. (NYSE:KR)

He added, “We intend to continue looking for opportunities to leverage our strong financial flexibility to safeguard our associates’ benefits, increase certainty and control over future pension obligations, and continue delivering strong shareholder value.”

The Kroger Co. (NYSE:KR) is one of the world’s largest retailers with 375,000 associates serving customers in 2,640 supermarkets and multi-department stores under local name brands including Kroger, City Market, Dillons, Food 4 Less, Fred Meyer, Fry’s Harris, Teeter, Jay C, King Soopers, QFC, Ralph’s and Smith’s.

The company also operates 786 convenience stores, 320 fine jewelry stores, 1,240 supermarket fuel centers and 38 food processing plants in the United States.

The Kroger Co. (NYSE:KR) managed to withstand a tough situation for grocery stores amid a slow economy and increased competition from discount and traditional stores such as Target Corporation (NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT) over the last few years, and recently posted moderately strong results. The company delivered $0.81 in diluted earnings per share and identical supermarket sales growth for its fourth quarter fiscal 2014 reported in March.