PLANSPONSOR - April/May 2019 - 70
DB FOCUS
Pension
Risk
Transfers
Increase
Several trends drive
the dynamic growth
M
att McDaniel, leader of the
financial strategies group at
consulting firm Mercer in New
York, points to the " glacially " slow pace
at which the pension industry moves-
although not the entire industry. " Within
it, the most dynamic part is probably pension
risk transfer. It didn't really exist
until six or seven years ago and has gone
from nothing to a pace of $30 billion per
year, and with that has been an evolution
in the players and strategies, " he says.
" One driver of growth in the business
is a desire among sponsors to focus
on their core businesses, which, for many,
is not the legacy pension fund, " notes Ali
Vaseghi, head of the pension risk transfer
business at insurance giant AIG, also in
New York. " Companies care deeply about
their employees, but they don't want to
bog down their quarterly earnings calls
with their pension's funded status and
required contributions. "
The machinations behind pension
risk transfers are quite complex, but at
a high level the idea is simple: Sponsors
settle their future benefit obligations
to employees with a single payment,
either to them directly in a lump sum
or through an insurance company that
pays the benefits over the employee's
lifetime via an annuity. Sponsors are
able to greatly reduce the cash costs of
keeping their plan going and the impact
of pension liabilities on future finances.
Many risk transfers are small steps
that whittle plans down to a more manageable
size. One motivation has been the
annual cost of insurance premiums
levied by the Pension Benefit Guaranty
Corporation (PBGC). The flat rate for
single-company plans is $80 per participant,
more than double the rate of 10 years
ago, and an additional premium is charged
at $43 per $1,000 of unfunded liability.
" A lot of the lump-sum payments to
terminated employees, and many of the
70 PLANSPONSOR.com April - May 2019 Art by Nick Little
annuity transactions, were limited to small
portions of the plans, " says Jason Richards,
a retirement risk consultant in the St.
Louis office of Willis Towers Watson.
" They made operations more efficient by
eliminating PBGC premiums, but many of
those opportunities are now gone. "
Another, more powerful, force behind
risk transfer transactions is the strength
in the financial markets and the resulting
improvement in funded status, which
moves plans closer to ultimate termination.
Mercer estimated the funded status
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PLANSPONSOR - April/May 2019
Table of Contents for the Digital Edition of PLANSPONSOR - April/May 2019
2019 Plan Sponsor of the Year Winners and Honorees
2019 DB Administration Survey
2019 PLANSPONSOR Service Stars
Acting on ESG Principles
Pension Risk Transfers Increase
Out of Harm's Way
PLANSPONSOR - April/May 2019 - C1
PLANSPONSOR - April/May 2019 - FC1
PLANSPONSOR - April/May 2019 - FC2
PLANSPONSOR - April/May 2019 - C2
PLANSPONSOR - April/May 2019 - 1
PLANSPONSOR - April/May 2019 - 2
PLANSPONSOR - April/May 2019 - 3
PLANSPONSOR - April/May 2019 - 4
PLANSPONSOR - April/May 2019 - 5
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PLANSPONSOR - April/May 2019 - 19
PLANSPONSOR - April/May 2019 - 20
PLANSPONSOR - April/May 2019 - 21
PLANSPONSOR - April/May 2019 - 2019 Plan Sponsor of the Year Winners and Honorees
PLANSPONSOR - April/May 2019 - 23
PLANSPONSOR - April/May 2019 - 24
PLANSPONSOR - April/May 2019 - 25
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PLANSPONSOR - April/May 2019 - 45
PLANSPONSOR - April/May 2019 - 46
PLANSPONSOR - April/May 2019 - 47
PLANSPONSOR - April/May 2019 - 2019 DB Administration Survey
PLANSPONSOR - April/May 2019 - 49
PLANSPONSOR - April/May 2019 - 50
PLANSPONSOR - April/May 2019 - 51
PLANSPONSOR - April/May 2019 - 52
PLANSPONSOR - April/May 2019 - 53
PLANSPONSOR - April/May 2019 - 54
PLANSPONSOR - April/May 2019 - 55
PLANSPONSOR - April/May 2019 - 56
PLANSPONSOR - April/May 2019 - 57
PLANSPONSOR - April/May 2019 - 2019 PLANSPONSOR Service Stars
PLANSPONSOR - April/May 2019 - 59
PLANSPONSOR - April/May 2019 - 60
PLANSPONSOR - April/May 2019 - 61
PLANSPONSOR - April/May 2019 - 62
PLANSPONSOR - April/May 2019 - 63
PLANSPONSOR - April/May 2019 - 64
PLANSPONSOR - April/May 2019 - 65
PLANSPONSOR - April/May 2019 - 66
PLANSPONSOR - April/May 2019 - 67
PLANSPONSOR - April/May 2019 - Acting on ESG Principles
PLANSPONSOR - April/May 2019 - 69
PLANSPONSOR - April/May 2019 - Pension Risk Transfers Increase
PLANSPONSOR - April/May 2019 - 71
PLANSPONSOR - April/May 2019 - Out of Harm's Way
PLANSPONSOR - April/May 2019 - 73
PLANSPONSOR - April/May 2019 - 74
PLANSPONSOR - April/May 2019 - 75
PLANSPONSOR - April/May 2019 - 76
PLANSPONSOR - April/May 2019 - C3
PLANSPONSOR - April/May 2019 - C4
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