Pension Risk Transfer
Successful and Seamless Execution To Help You Achieve Your Risk Management Goals.
Pension risk transfer is a critical financial option for employers, specifically those who want to minimize fluctuations by decreasing Pension Benefit Guaranty Corporation (PBGC) premiums, managing risk and planning for the plan’s fate. Transferring risk can benefit your company and set the stage for a financially secure future.
What is Pension Risk Transfer?
Pension risk transfer (PRT) is the process of shifting a portion or all of a defined benefit plan’s liability away from the business that sponsors a pension plan to a third party. A defined benefit (DB) plan is an employer-sponsored retirement plan in which participants accrue a monthly benefit based on the plan’s benefit formula. From there, once a participant has reached retirement age, that benefit is paid monthly, based on the form of payment selected.
What Are the Benefits of Pension Risk Transfer?
Pension risk transfer offers several benefits for businesses and pension plan participants:
Risk mitigation
Transferring pension obligations to an insurance company helps mitigate various risks, including investment volatility, interest rate fluctuations, and longevity risk. By offloading these risks to a third party, companies can better manage their financial exposure and ensure the stability of pension payments to retirees.
Financial liability reduction
Pension plans represent a significant financial liability on a company's balance sheet. Pension risk transfer allows businesses to reduce their long-term financial obligations by transferring pension liabilities to an insurance company. This can improve the company's financial position, reduce balance sheet volatility, and enhance shareholder value.
Administrative simplification
Pension plans require ongoing administration and compliance with regulatory requirements, which can be complex and costly for businesses. Pension risk transfer simplifies administrative tasks by transferring responsibility for pension payments to an insurance company. This frees up resources and allows companies to focus on their core business activities.
Overall, pension risk transfer offers businesses and pension plan participants a range of benefits, including risk mitigation, financial liability reduction, administrative simplification, participant security, and funding flexibility. These benefits help ensure the long-term sustainability and stability of pension arrangements.
Pension Risk Transfer with October Three
Our comprehensive approach to Pension Risk Management ensures positive outcomes for clients of all sizes. We work with you from start to finish to clearly define pension goals, create a customized roadmap and deliver successful results based on decades of best practice experience. Our attentive professional support helps ensure you receive the lowest cost available for your annuity purchase, and our focus on transparency ensures you see that cost up front. Here are some of the benefits of pension risk transfer with October Three.
Simplification
Options are explained in plain English so decisions can be made with confidence.
Unbiased
Conflict-free guidance focused on your specific needs.
Cost Effective
Our comprehensive approach ensures you receive ‘Best Pricing’ from insurance companies.
Custom Tailored
Participant communication materials and expert support that ease the burden on plan sponsors and actuaries.
Experienced
With over 25+ years of experience, you can be confident you’ll receive the best options available for your plan.
Comprehensive
All facets of your transition are continually monitored to ensure a successful outcome. Services extend beyond simply identifying insurance companies.
Achieving Your Pension Risk Transfer Goals
We align our approach with your interests. Detailed criteria is used to carefully evaluate each participating insurance company so you receive the financial due diligence needed to fulfill your fiduciary obligations. Our seasoned pension risk transfer professionals aggressively negotiate annuity pricing for you with participating insurance companies. We understand that predictable pricing is important, which is why you will receive a competitive bid that includes a comprehensive scope of services up front – minimizing the need for out-of-scope work.
Settlor functions
Focus on transferring pension risk and plan liability to an insurance company.
Our approach secures successful outcomes that:
- Maximize Savings
- Minimize Costs
- Deliver a Seamless Transition
Fiduciary Decisions
Focus on compliance to protect the best interests of beneficiaries and plan participants.
Our process ensures you meet all fiduciary requirements by:
- Selecting the “Safest Available Annuity” provider per DOL Interpretive Bulletin 95-1
- Negotiating a competitive and well-structured annuity contract
- Securing state protection, where available
Global Insights on the Pension Risk Transfer (PRT) Market
Discover in-depth analysis and valuable insights into the flourishing global pension risk transfer market. Stay ahead of the competition and empower your clients with the knowledge to make informed decisions.
Why Choose October Three's Annuity Services?
Customized Solutions
Multidisciplinary expertise drives positive outcomes for clients of all sizes from start to finish
Cost Effective
Comprehensive preparation delivers optimal, conflict free, annuity pricing
Trusted Expertise
25+ years of expertise negotiating with the insurance industry.
October Three Pension Risk Transfer Consulting Services Include:
- Retirement Plan Liability Management Analysis
- Pension Forensics
- Pension Risk Defeasance Options
- Pension Risk Transfer Strategies
- Lump Sum Window Fulfillment
- Comprehensive Annuity Searches & Cost Negotiations
- Market Pension Plan Liability Transfer
- Department of Labor 95-1 Financial Analysis
- Plan Termination Services
- Address Verification & Death Audits
Pension Risk Transfer Resources
Explore our resources below to better understand pension risk transfer.
What is pension risk transfer?
If you are a pension plan sponsor, your current plan could be putting you at risk. Here’s why pension risk transfer should be your next move.
Pension Risk Transfers (PRTs): A History
The pension risk transfer (PRT) market has experienced remarkable growth over the past 12 years. Since January 2020, over 2.5 million participants have been part of PRT deals, a number that continues to climb. The U.S. PRT premium hit a remarkable $ 26 billion in the first half of 2024, with a record-breaking 327 buyout contracts sold, underscoring the market's impressive expansion.
How to Reduce PBGC Premiums: 3 Strategies and Considerations for Employee-Sponsored Pension Plans
In this article, we outline how an independent actuarial review can help plan sponsors reduce PBGC premiums for their defined benefit pension plans.
Pension Risk Transfer FAQs
What Companies Consider Pension Risk Transfer?
+Companies that typically consider pension risk transfer are those with defined benefit pension plans. These plans promise retirees a specific monthly benefit for life, based on factors like salary and years of service. However, managing these plans can expose companies to various risks, including market fluctuations, longevity risk, and regulatory changes.
Why Would a Business Consider Pension Risk Transfer?
+There are many reasons as to why an organization might consider pension risk transfer. Pension risk transfer offers businesses a way to reduce financial risk, simplify administration, and focus on core business activities, ultimately improving their financial position and operational efficiency.
Who Needs Pension Risk Management?
+Pension risk management is essential for companies offering defined benefit pension plans, pension plan trustees and administrators, insurance companies providing pension solutions, government regulators, and financial advisors and consultants. It helps these entities effectively navigate the challenges associated with pension obligations and ensure the long-term sustainability of pension arrangements.
Contact Mark Unhoch
Ready to transfer your pension plan risk? Mark is here to answer your questions on how our Risk Management Team can support your needs.
