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Pension Funds

U.S. corporate pension buyouts hit $8.2 billion in second quarter — survey

FedEx Corp.. in May purchased a group annuity contract with Metropolitan Life Insurance to transfer about $6 billion in U.S. pension obligations, the largest transaction in the quarter.

U.S. corporate pension plan buyout sales totaled $8.2 billion during the second quarter, a LIMRA Secure Retirement Institute sales survey found.

It is the highest second-quarter total recorded by the research institute in the past 15 years and the 13th consecutive quarter sales have surpassed $1 billion. It doubles the $4.1 billion in pension plan buyout sales in the second quarter of 2017.

Year-to-date June 30, pension plan buyout sales totaled $9.6 billion compared to $5.5 billion during the same period in 2017. The institute also projects total sales for 2018 will exceed $23 billion. Buyout sales in 2017 totaled $22.99 billion, according to the survey.

"Several large pension risk buyout contracts — announced since the beginning of the year — were reported in the second quarter, driving the overall growth," said Eugene Noble, research analyst at the institute, in a news release. "We expected more activity in the pension risk transfer market as plan sponsors take advantage of the ability to make tax-deductible contributions at a higher rate before the new rates kick in as a result of the tax reform law."

By far the largest transaction in the second quarter was Memphis, Tenn.-based FedEx Corp.'s purchase of a group annuity contract from Metropolitan Life Insurance Co. to transfer about $6 billion in U.S. pension plan obligations. It was also the largest of any deal in the U.S. since Verizon Communications Inc., New York, purchased a group annuity contract from Prudential Insurance Co. of America in 2012 to transfer $7.5 billion in U.S. pension plan obligations.

The LIMRA Secure Retirement Institute surveys the 15 financial services companies that provide all the group annuity contracts for the U.S. for its U.S. Group Annuity Risk Transfer Survey every quarter.