What Step Will You Take?

Evidence demonstrates that capital markets reward companies that divest non-core operations and unprofitable segments, particularly if the transaction improves the performance of the company’s remaining operations. Much like an unprofitable business segment, defined benefit pension plans divert resources from the core business, constrain cash flows and limit performance. Since decisions to divest and decisions to de-risk a pension obligation are driven by the same factors, pension risk transfer should be looked at through a divestment lens.

In transforming the pension risk transfer market, there's an important intangible that our team has carefully cultivated since long before it was fashionable. Our secret is diversity and inclusion. Our success proves that what is right for our people is nothing short of fantastic for the bottom line.

This paper focuses on the steps involved in the most complete form of pension risk transfer: a buy-out transaction. Whether or not a buy-out is imminent, there are preparations a plan sponsor can undertake to make a future transaction easier and to shorten the timeline for execution.

Despite recent historically strong asset performance, many companies with underfunded pension plans are finding it difficult to earn their way out of pension deficits. One contributing factor is that retirees comprise roughly 50% of total liabilities for the average plan. To fulfill these obligations, a significant amount of benefit payments need to be made each year from plan assets.