Executing a buy-out transaction can significantly reduce or eliminate future pension plan risk for plan sponsors. Following a structured process and working with an experienced insurer are key to accomplishing a smooth pension risk transfer. Whether a buy-out is imminent, a few years away, or only a consideration, there are steps a plan sponsor can take today to ensure that the process goes smoothly when and if a buy-out solution is pursued. Plan sponsors can start now by taking action to get their data and governance process in order, and to conduct an initial high-level feasibility assessment of a potential risk transfer transaction. Given the increasing number of buy-out transactions, as well as the funded status volatility and increasing costs associated with DB plans, plan sponsors may find their boards of directors eager to understand the process and potential cost of executing a buy-out solution.
Margaret G. McDonald, FSA, Senior Vice President, Pension Risk Management Actuary, Prudential Retirement and Scott E. Gaul, FSA, Senior Vice President, Head of Distribution, Prudential Retirement
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