Defined benefit pensions and annuities
Many sponsors of corporate defined benefit (DB) pension plans have an interest in pro actively managing pension risks. It is possible to effectively de-risk DB plans and buy out plan liabilities through available annuity arrangements. The key questions are how, when and at what cost?
Planning the end game is crucial
We provide fee-based advice to plan sponsors who are looking for ways to transfer benefits risk to a third party insurance company provider. Our focus includes developing feasibility and assessment plans to determine strategic risk transfer costs, monitoring and reporting risk transfer costs over time, analyzing and assessing buy-in versus buy-out strategies, evaluating and determining suitable providers, and implementing buy-in and buy-out strategies within a fiduciary compliant standards framework.
We take an integrated approach
The benefits of funding and de-risking pension plans are clearly very compelling. Many sponsors of under-funded pension plans may have limited or no capacity to execute a pension risk transfer (PRT) transaction in the immediate future.
For such companies, a long-term investment + PRT strategy to de-risk the pension plan is appropriate. Critically, a governance framework must be established to allow risk to be taken off the table should markets move favorably. For example, if interest rates were to rise significantly, reducing the present value of liabilities, it might make sense for sponsors to dedicate more assets to explicitly matching liabilities, or if the funding level is sufficient, to annuitize all or a portion of plan liabilities.
Given the unique nature of pension liabilities and the non-transparent nature of annuity pricing, it is important for sponsors to work with a partner who can track annuity pricing and advise when a PRT transaction may be most appropriate for their situation and objectives.
Let's talk.
Ready to see what P-Solve can do for you? Call Steve Keating at (508) 620-6790 or email steve.keating@psolve.com to set up an appointment.