L to R: Dylan Tyson, Christine Marcks, Phil Waldeck, Prudential Retirement
Pension risk transfer first took hold in the U.K. in the
mid-2000s. At that time, the method of de-risking pensions gaining favor in the
U.S. was liability-driven investing (LDI). But the pension risk transfer
concept also was being worked on here, behind the scenes. In May 2011,
Prudential Retirement executed the nation’s first pension buy-in transaction.
Hickory Springs Manufacturing Company, in Hickory, North
Carolina, signed on as Prudential’s inaugural client, choosing the company’s
Portfolio Protected Buy-in to complete a $75 million pension risk transfer
transaction. As Prudential described it, the Portfolio Protected Buy-in is “a
single-premium, separate-account solution that helps plan sponsors meet their
pension obligations and create retirement security for more Americans.” In
fact, Hickory Springs was named PLANSPONSOR’s 2012 Plan Sponsor of the Year in
the Defined Benefit (DB) category because, rather than find a way to escape
defined benefit plan obligations, it selected a pension risk transfer option to
ensure DB plan participants got the benefits they had accrued over their
The momentum continued last year. In June 2012, General
Motors announced it was offering lump sum payments to select, U.S. salaried
retirees while other retirees would receive continued monthly pension payments.
General Motors selected Prudential to administer those payments. In December,
Verizon and Prudential completed a pension risk transfer transaction, as well.
Prudential announced that the Verizon Management Pension Plan had purchased a
single-premium group annuity contract from Prudential Insurance to settle
approximately $7.5 billion of its plan liabilities.
Prudential has become the go-to resource for pension
de-risking, issuing white papers and reports about the risks of DB plans and
providing guidance about how to de-risk the plans.
Apparently, the firm anticipates more risk transfer activity
to come—it recently announced it was growing its pension risk transfer team. —Rebecca
PLANSPONSORâ€™s Prudential News Highlights
20 Institutional Leaders of the Past 20 Years