DB Sponsors Prioritize Terminations, Buyouts as De-Risking Strategies

As record corporate defined benefit plan funding levels and high interest rates push plan sponsors to consider de-risking, plan terminations and buyouts have dominated the flow of pension risk transfer deals so far this year.

According to October Three Consulting LLC’s recent “2026 PRT Trend Report,” plan terminations made up 66% of all pension risk transfers in the first half of 2026, while participant lift-outs, which focus specifically on transferring the liabilities of retirees already receiving benefits, made up 28%. While the rate of U.S. PRT sales has declined since the same period last year and insurance carriers predict the number and net asset amount of PRT transactions in 2026 will be lower than in 2025, the general trend toward plan terminations in the PRT sector continues, the report stated.

Meanwhile, the MetLife 2026 Pension Risk Transfer Poll, released October 7, showed that a record 95% of DB plan sponsors reported having de-risking goals—up from 76% in 2019. PRTs remained the chief de-risking strategy among MetLife’s respondents, with 88% of sponsors with de-risking goals reportedly considering a PRT solution with an insurer.

Consistent with last year’s MetLife poll, 80% of sponsors plan to completely divest their pension liabilities within the next five years.

“The question is no longer whether sponsors will de-risk, but how and when,” said Elizabeth Walsh, MetLife’s vice president and head of U.S. pensions, in a statement. Plan sponsors have “built the funding strength, governance and internal alignment to act.”

PRT Strategies

Among surveyed sponsors open to a PRT, 32% said they expected to complete a deal within two years, and another 56% expected to complete one within two to five years, MetLife’s poll showed. Only 3% of sponsors responded that their plans for a PRT have been delayed or paused.

Half of those surveyed cited interest rates as the top catalyst for undertaking a PRT transaction, up from 41% who said so last year, MetLife’s poll demonstrated. Some 62% of respondents said current rates have provided favorable annuity buyout pricing. Last year, 45% of respondents cited market volatility as their top catalyst.

Annuity buyouts, in which a plan transfers a portion or all of its liabilities to an insurer, remained the dominant de-risking strategy among MetLife’s respondents: 76% expected to complete a buyout, either alone or in connection with a lump-sum distribution. Among sponsors planning to conduct a buyout, 67% expected to execute a retiree lift-out. That figure rose to 82% among plans with at least $3 billion in DB assets.

Jake Pringle, leader of the annuity placement team at Milliman, previously told PLANSPONSOR that when his firm’s Pension Buyout Index shows the buyout cost at 100% or slightly lower, interest rates for annuity purchases are more favorable. When the index comes out closer to 103% or 105%, the opposite is true.

In September, Milliman estimated that the competitive retiree buyout cost, as a percentage of accounting liability, increased 20 basis points to 99.9% from 99.7% of a plan’s accounting liabilities. That marked the fourth month in a row that competitive costs landed under 100%.

When planning an annuity buyout, sponsors reported that their top consideration was the financial strength of the insurer, cited by 65%—up from 33% reported last year, per MetLife. When selecting an insurer, 71% of sponsors reported they prefer one with in-house administrative capabilities to one that outsources administration to another entity.

Buy-Ins Emerge

In addition to buyouts, buy-ins have emerged as a distinct and increasingly strategic solution for plan sponsors, particularly among jumbo plans with at least $3 billion in DB plan assets, according to MetLife’s poll. Buy-ins, in which a plan sponsor buys an insurance policy to cover the cost of certain participants’ benefits and holds the policy as a plan asset, allow sponsors to secure pricing certainty while preserving the flexibility to complete a plan termination at a later date.

The most commonly cited reason for conducting a buy-in—selected by 58% of sponsors—was the “ability to balance business and employee priorities by enhancing benefit security for participants while supporting corporate financial objectives,” the MetLife summary stated.

What to Watch

Paula Cole, Nationwide’s head of PRT, said in a statement that insurer capacity, litigation, interest rates and data will continue to shape the PRT market in 2026.

“The number of insurers offering PRT solutions has more than doubled over the past decade, creating a more competitive marketplace and providing plan sponsors with greater choice,” Cole said in the statement. “More bidders can improve pricing opportunities, but they can also increase the complexity of evaluating carriers, contracts and fiduciary considerations.”

Compared to last year, insurers reported less concern this year about PRT litigation. Mark Unhoch, a partner in and the pension risk transfer practice leader at October Three, says the reason for the reduction is that most recent PRT cases have been settled in the plan sponsor’s favor.

However, Cole wrote in the press release that several cases involving PRT providers remain unresolved, and some sponsors may be delaying de-risking until the cases are resolved.

On the interest rates, Cole wrote that despite Nationwide’s Office of Economics’ expectation that the Federal Reserve will raise rates twice this year, it remains unclear to her whether the increases will “rein in the key drivers of inflation.” Continued uncertainty related to rate movement could also influence the timing and size of transactions brought to the market, she wrote.

On data quality, Cole wrote that “efficient processes” have become increasingly important for plan sponsors and insurers. Having accurate participant data allows insurers to provide more precise pricing and can help reduce delays throughout the transaction process.

October Three’s “PRT Trends Report” stated that incomplete data was the greatest barrier to timely client onboarding for 72% of insurance carriers. Some 61% of insurance carriers surveyed reported that incomplete data from sponsors increased their post-sales expenses.

MetLife’s Pension Risk Transfer Poll was fielded in July among 250 DB plan sponsors with at least $100 million in plan assets that have pension de-risking goals.

In July and August, October Three surveyed 18 insurance companies representing roughly 78% of carriers that actively participate in the PRT market.

More on this topic:

	Analysts Spot Shift in How Companies View Their Pension Funds
	Plan Sponsors Weigh Options for Pension Plan Funding
	SFA Funds, Market Returns Boost Multiemployer Pension Funding