The volume of lump-sum buyout offers has slowed dramatically so far in 2013 following a flurry of activity last year, but lump sums remain a forefront topic for corporate pension funds, according to a report from Greenwich Associates.
The report states some consultants expect the high activity levels to continue as companies look to reduce pension liabilities' effect on earnings. However, the report also raises the question that the companies interested in lump sums already pulled the trigger last year. At least 17 companies offered some kind of lump-sum buyout last year, and most companies had about 50% of participants accept the offer.
“There are some pretty clear requirements to who can and can't do it — the biggest being the funding level,” said Maribeth Farley, marketing manager, corporates, at Greenwich. Ms. Farley added it also comes down to having the cash for administration and execution costs and having the right communications ready to reach former employees.
“I think people are thinking about buyouts, and they still appear to be viable,” Ms. Farley said. She added that companies are exploring lump sums or at least a derisking path that could lead to buyout offers.
About a third of institutional investors said derisking the pension plan, managing volatility and funding status were top concerns in a 2012 Greenwich survey. Respondents could select more than one option.