The Pension Rights Center wants Congress to impose a moratorium on derisking moves by corporate defined benefit plans, including lump-sum buyouts and annuity contracts, while the impact on retirees is studied.
Karen Friedman, executive vice president and policy director of the Washington-based group, said the impact of such derisking strategies on workers and retirees is not well understood.
“I don't think anybody's had a chance to catch their breath. Taking a pause is the least we could do to ensure that we at least study what could happen,” Ms. Friedman said in an interview.
“Insurance company annuities … could leave retirees with less protection (and) lump sums place the burden on individuals to ensure that the money lasts throughout retirement,” Ms. Friedman said in a news release. She noted that while corporate pension benefits are backed by the Pension Benefit Guaranty Corp., less is understood about the backing of insurance annuities.
The Wednesday announcement of Verizon Communications Inc.'s decision to purchase an annuity contract from Prudential to transfer $7.5 billion in pension obligations, and a $26 billion pension risk transfer announced in June by General Motors Co., also with Prudential, underscore the need for congressional scrutiny first, PRC officials say.
Peggy McDonald, senior vice president and actuary with Prudential Retirement, said companies interested in pension derisking strategies “take equally seriously the need to provide retirement security” to their employees. She noted that unlike some pension plans struggling with underfunding, “by definition in a risk transfer deal, the obligations are 100% funded.”
Staff at congressional committees with jurisdiction over pension issues declined to comment.