Preparing for Pension Risk Transfer

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. Prudential delivers a comprehensive roadmap for the buy-out process. Download the full paper here.

Interest in pension risk transfer continues to intensify among corporate
sponsors of U.S. defined benefit (DB) plans, as plan sponsors are looking
for ways to reduce both balance sheet liabilities and funded status volatility.
Against the backdrop of significantly increasing Pension Benefit Guaranty Corporation (PBGC) premiums due to recent legislation, as well as new mortality assumptions that increase DB plan liabilities, the market for buy-out solutions reached a record high in 2017 with nearly $24 billion in sales.1

 

United States Single Premium Buy-out Sales

Source: LIMRA Group Annuity Risk Transfer Survey, 4th Quarter 2017
United States Single Premium
Buy-out Sales*
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Prudential has completed large buy-out transactions with General Motors, Verizon, Motorola, Bristol-Myers Squibb, Kimberly-Clark, Timken, Philips, JCPenney, WestRock, United Technologies, The Hartford, International Paper and Raytheon. These transactions firmly re-established a U.S. market for buy-out solutions that had been largely dormant since the 1990s. Although news coverage focuses on the “jumbo” transactions, the stepped-up activity in the buy-out market has not just been for large companies. Transaction volume in the small to mid-market has also increased.

REFERENCES

    • 1.LIMRA Group Annuity Risk Transfer Survey, 4Q 2017.