Getting Out With a Buy-In

How shifting pension risk could be good for business

Given the current volatility, attention has shifted away from generation of high returns in favor of preserving funded status. Explore how a buy-in offers a turn-key solution that can help U.S. companies preserve the valuable gains in funded status. Download the full paper here.

Twice since 2000, America’s corporate defined benefit (DB) sponsors have watched funded status drop more than 30%. These dramatic declines have led to an increased interest in risk transfer transactions. In fact, 100 of the largest U.S. corporate pension plans have made close to $796 billion in pension contributions since 2000, while still not quite regaining their pre-financial crisis funded status.

100 of the largest U.S. corporate pension plans have made close to $796 billion in pension contributions since 2000

100 of the largest U.S. corporate pension plans have made close to $796 billion in pension contributions since 2009

Source: Milliman 100 Pension Funding Index; the 100 largest U.S. corporate pension plans. As of October 31, 2019.

It’s clear that sponsors have dedicated real resources to fund pension plans and have seen improvements over the past decade. However, pension plan sponsors have once again been reminded of the fickleness in their funded status with many sponsors making significant progress toward full funding early in the year only to see their gains quickly wiped away. Given the current volatility lessons and those from the past, attention has shifted away from generation of high returns in favor of preserving funded status.

So how do we keep U.S. companies from watching their funded status erode during the next credit cycle, leading to the diversion of resources away from their core business?