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Benefits October 22, 2025
MetLife Finds Most Companies Intend to Divest Pension Liabilities Within 5 Years
2025 has been a ‘tailwind of a year for pension finances,’ says Brian Donohue of October Three.
Reported by Emily Boyle
Art by David Comai
September marked the sixth consecutive month of improvement for corporate pension funding, according to Zorast Wadia, a principal and actuary at Milliman. The funded status of the largest 100 corporate defined benefit plans reached 106.5%, its highest level since October 2007—just before the global financial crisis.
2025 has been a “tailwind of a year for pension finances,” says Brian Donohue, a partner in October Three Consulting. There is still time left in the year’s fourth quarter, and he says companies are likely terminating more plans in 2025 “than any year, historically.”
Along the same lines, MetLife’s 2025 Pension Risk Transfer Poll revealed that 94% of plan sponsors with de-risking goals intend to completely divest their pension plan liabilities, and 80% said they plan to do so within five years. The insurer estimated that it would take companies an average of 3.6 years to fully divest.
Divesting liabilities may make sense, given the shift to defined contribution plans from defined benefit plans for providing retirement benefits. According to the “Vanguard Retirement Outlook: Strong National Progress, Opportunities Ahead,” among U.S. workers, 52% had access to a DC plan in 2022, up from 35% in 1989. DB plan access declined to 23% from 38% over the same period.
When MetLife began its study, in 2015, annual PRT volumes hovered at less than $14 billion, according to the poll. Since then, volumes have multiplied more than three-fold, to nearly $52 billion in 2024. With private sector DB plans holding $3 trillion in plan assets that have yet to be de-risked, the market is expected to continue its upward trajectory—potentially reaching more than $100 billion in annual volume by 2030, MetLife stated.
Catalysts and Criteria
Plan sponsors surveyed by MetLife said market volatility is the top catalyst for their PRT considerations (45%), followed by interest rate changes (41%). Ninety-two percent said their company is weighing its pension plan’s value against the cost of the benefit. Even more (95%) said they are considering transferring that pension risk to an insurance company.
There is no universal “right time” for a company to perform a PRT, says Melissa Moore, head of annuities at MetLife. Decisions are driven by a company’s “strategic path,” market conditions and plan health.
When a company makes what MetLife calls a “critical fiduciary decision,” Moore says the insurer will ensure the plan sponsor’s pricing and administrative data are prepared so the transfer can be seamless.
Surveyed plan sponsors said the considerations they believe are most important in choosing an insurer are the financial strength of the insurer (33%), the price/cost of the annuity buyout transaction (24%), a strong cybersecurity program (15%) and market leadership (13%).
The Department of Labor’s Interpretative Bulletin 95-1, the guidance document issued in 1995, describes what fiduciaries operating under ERISA must consider when selecting an insurer as a pension risk transfer provider to be sure that the provider is safe one. The six criteria include the:
- Insurer’s investment portfolio;
- Size of the insurer relative to the size of the PRT contract;
- Insurer’s level of capital and surplus;
- Insurer’s other lines of business;
- Structure and guarantees of the contract; and
- Additional protection offered by state-level guaranty associations.
A 29-page DOL report issued in 2024 concluded the department is “not prepared at this time to propose amendments to the Interpretive Bulletin,” but also indicated that the department could consider changes to the bulletin in the future.
Another factor to consider in choosing a PRT partner is how the insurer manages the administration of benefits to its participants. Among plan sponsors, 83% of respondents said they prefer to select an insurer with in-house capabilities, rather than an insurer that will outsource administration to another entity (17%). According to the poll, in-house administrative capabilities are “viewed as safer and more reliable.”
Considering 94% of survey respondents reported corporate management is paying “significant attention” to their pension plan, plan sponsors are ready to transact on an annuitization and just waiting for the right time to do so, Moore says.
“If your data is ready and you have the right governance framework to make a decision, then there’s no constraint on time,” she says.
Other Options
According to October Three’s Donohue, companies not yet looking to terminate their DB plans might benefit from offloading some of their smaller liabilities. For example, a company could offer a lump sum window to former employees with small, vested pension balances or offer to buy an annuity to cover some retiree benefits.
However, de-risking has been “in full swing” for several years now. For lump sum windows, it may be the case that almost every plan has “been to that well a couple of times now,” Donohue says.
MetLife’s poll found that of the 35% of plan sponsors who have either started or completed a PRT within the past two years, 24% offered a lump sum distribution window to terminated, vested participants.
Aside from offloading liabilities, plan sponsors can also use pension funding surpluses to offset administrative expenses, among other uses.
Section 606 of the SECURE 2.0 Act of 2022 extended the opportunity for overfunded pension plans—those defined as at least 110% funded—to transfer up to 1.75% of plan assets to a program used to pay for retiree medical and life insurance benefits to December 31, 2032, rather than allowing the relief to expire at the end of 2025. When plan sponsors polled by MetLife were asked if they plan to use a DB surplus to fund other post-retirement benefits, nearly half (48%) said they will.
Aside from de-risking plans through PRTs and transferring assets, plan sponsors can also de-risk their portfolios, Donohue says. If a plan is fully funded, a company can utilize bonds or other strategies to match the plan’s liabilities, or use liability-driven investing and other strategies to reduce portfolio volatility.
MetLife’s Pension Risk Transfer Poll was fielded online from August 8 through August 27. Survey responses were collected from 231 DB plan sponsors with at least $100 million in plan assets that have either long-term or near-term pension de-risking goals.
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