“While PRT can be a highly effective tactic for plan sponsors to reduce risk and shift liabilities off their books,” MassMutual says, “it’s possible to increase pension costs and risks if a PRT is not executed with long-term goals in mind.”
Tag: pension risk transfer
Year-to-date, buy-out sales have been $9.6 billion, a 76% increase from the first two quarters of 2017.
Peggy McDonald, the senior vice president who led negotiations for Prudential, says the firm is committed to providing vested participants, retirees and benefices seamless transition.
The company is facing lawsuits by a retirement plan participant whose assets were transferred to MetLife as well as by Massachusetts Secretary of the Commonwealth William Galvin.
Nearly two-thirds (62%) of respondents to a survey say they are "very likely" to transfer some or all of their pension obligations to an insurance company once their DB plan becomes well-funded.
DB plan sponsors want to keep control of their plans as they de-risk.
According to MetLife, the pension risk transfer (PRT) agreement involves pension obligations of $6 billion.
Corporate plans are winding down as public plans are strengthening themselves for the long run.
Aon shows only 6% of U.S. corporate DB plan obligations have actually been settled since 2012.
As part of the analysis of pension investments, the PensionSmart Analysis tool can examine different investment “glide path” options to help sponsors achieve specific goals related to funding and liability matching.
“Companies feel that the time is right to reduce or eliminate their pension funding shortfalls.” says Matt McDaniel, partner, Mercer.
The most common preparatory steps taken include an evaluation of the financial impact of a pension risk transfer; discussions with stakeholders; data review/cleanup; and, exploration of the PRT solutions.