Employers want to meet their pension plan obligation but doing so can be challenging. For some, the administrative expenses, unpredictable rates, and changing business structures can make it too risky or too costly. Explore how and when a pension risk transfer may help.

What is a pension risk transfer?

A pension risk transfer (PRT) is the process of transferring a defined benefit plan’s risk away from an employer who sponsors a pension plan. The two most common types of PRT are employers offering participants a lump sum payout and employers purchasing a group annuity from an insurance company.

Is a pension risk transfer solution a good option?

Pension risk transfers can benefit organizations looking to reduce the financial risk associated with their defined benefit pension plan. At the same time, this can help organizations keep their commitment to provide pension benefits to applicable current and past employees. With a pension risk transfer solution, plan sponsors replace their current defined benefit plan for a single premium group annuity.

When to consider a pension risk transfer?

Here are some of the many reasons an organization might consider a pension risk transfer:

• Termination of a defined benefit pension plan. The plan sponsor purchases a group annuity contract from us, then we provide benefits to plan participants and their beneficiaries.¹
• A merger, acquisition, or sale of an organization. If the acquiring organization decides to discontinue a defined benefit plan, they can purchase a group annuity to continue benefits earned by participants of the acquired organization.
• Lift-out. An employer can purchase a group annuity for retired and/or terminated vested participants.
• It helps if an employer understands any post-placement impacts to the plan and avoid late surprises in the process.