Pru Completes Nation’s First Pension Buy-In

May 26, 2011 ( - Prudential Retirement says it has completed what it termed the nation’s first pension buy-in transaction.


According to the announcement, Hickory, North Carolina-based Hickory Springs Manufacturing Company signed on as Prudential’s inaugural client, choosing Prudential’s Portfolio Protected Buy-in to complete a $75 million pension risk transfer transaction. According to a press release, 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”.

The Portfolio Protected Buy-in mitigates plan sponsors’ pension plan risks by serving as a plan asset that effectively and simply matches assets to liabilities, according to Prudential.

According to the announcement, Prudential’s Portfolio Protected Buy-in is a separate account solution that “combines the strength of Prudential’s guarantee with a separate account portfolio to provide additional security”. The product is specifically designed for defined benefit plan sponsors who seek to transfer risk while preserving plan funded status. Portfolio Protected Buy-in does not trigger settlement accounting or accelerate pension contributions, according to the firm.

“Prudential is pleased to be the first company to bring a pension buy-in to employers in the U.S. We are also honored to be Hickory Springs’ provider of choice,” said Phil Waldeck, senior vice president and head of Prudential Retirement’s Pension & Structured Solutions business.

“With the help of our advisor BCG Terminal Funding Company, we selected Prudential Retirement because of its flexibility in structuring a solution that we feel will help us fulfill our fiduciary obligations and enhance our employees’ retirement security,” said Steve Ellis, Chief Financial Officer of Hickory Springs. “We were impressed with the Prudential Retirement team’s expertise and continued focus on our business needs.”

“BCG is proud to execute the first pension buy-in transaction in the United States on behalf of Hickory Springs,” said Michael Devlin, Principal, BCG Terminal Funding Company. “Our client recognizes that its pension plan is an important benefit to its employees, but the risks associated with pension plans have become a serious concern over the years. With the help of the ‘buy-in’ strategy, and Prudential’s commitment to adapt to the pension market’s needs, a product is now available to manage interest rate, market, and mortality risk and help our client continue to provide a valuable benefit for its employees.”

According to the press release, BCG Terminal Funding Company, founded in 1983, is one of the largest terminal funding consulting firms in the nation.  The firm says it specializes in working with plan sponsors who are seeking strategies to de-risk or terminate their defined benefit pension plan, and that it has consulted on over 2000 pension plans. 

The Portfolio Protected Pension Buy-in is issued by The Prudential Insurance Company of America, and according to the press release, guarantees are contingent on PICA’s claims paying ability.

“The financial crisis of 2008-2009 has had a profound and lasting impact on many employers that offer traditional pension plans,” said Glenn O’Brien, Managing Director of Prudential Retirement’s Pension & Structured Solutions business, in a press release, continuing “Fortunately, Prudential has a long history of offering risk management and risk transfer strategies that help address plan sponsors’ pension obligations. This transaction affirms Prudential’s position as a preferred provider of institutional retirement products and solutions for plan sponsors, advisors and consultants.”