Interest in Pension Risk Transfer Expected to Increase in 2019

The majority of DB plan sponsors plan to completely divest all of their company’s liabilities in the near future

While 2018 was another robust year for pension risk transfer (PRT), plan sponsors plan to increase their PRT efforts in 2019, a new poll of defined benefit (DB) plan sponsors by MetLife found.

According to the 2019 Pension Risk Transfer Poll, among DB plan sponsors with de-risking goals, 76% intend to completely divest all of their company’s liabilities at some point in the future.

“The poll findings indicate a trend in increased risk transfer activity as we anticipate plan sponsors will want to proactively deal with the cost and volatility of their plans,” says Wayne Daniel, senior vice president and head of U.S. pensions at MetLife. “As a result, many will begin to look more closely at the $3 trillion of DB plan liabilities that have not yet been de-risked and begin to evaluate how they can address this.”

Among the 67% of DB sponsors considering a risk transfer in the next two years, 77% have evaluated the financial impact of such a transfer, 74% have held discussions with key stakeholders, 65% reviewed and cleaned up their data, 59% have explored the solutions in the marketplace and/or quantified the cost of a pension risk transfer.

The majority, 79%, say they are more likely to consider an annuity buyout now that they have witnessed several large corporations taking this action. Sixty-seven percent say they will conduct an annuity buyout to de-risk, up from 57% in 2017 and 46% since 2015.

Fifty-four percent intend to tranche transactions by participant population. Retirees are identified as the most common population for which sponsors are considering purchasing annuities (54%), followed by terminated-vested participants (43%). Only one in three (30%) say they would secure a buyout for all participants.

Strategic Insight, parent company of PLANADVISER, conducted the survey for MetLife along with MMR Research Associates, in August and September. The full survey results may be downloaded from here.