U.S. corporate pension plan buyouts reached $1.1 billion in the first quarter of 2016, said a LIMRA Secure Retirement Institute sales survey.
According to the institute's quarterly survey, 68 U.S. companies purchased group annuity contracts from insurance companies to transfer their pension liabilities in the first quarter. The total of $1.1 billion is the first time since 2008 that level was reached in a first quarter, and it was the fourth quarter in a row that sales topped $1 billion. Sales totaled $5.6 billion in the fourth quarter, while in the first quarter of 2015, sales totaled $890 million.
Given that companies have traditionally waited until later in the year to pull the trigger on such transactions, the accelerated activity in the first quarter is a clear sign that companies are more eager than ever to derisk their pension plans, said a news release on the survey.
“Along with large increases in PBGC premiums, plan sponsors who try to increase funding for their group pensions face an uphill challenge with uncertain market returns and low interest rates,” said Michael Ericson, analyst for LIMRA Secure Retirement Institute, in the release.
One of the larger transactions announced in the first quarter was Philadelphia-based Chemtura Corp.'s purchase of a group annuity contract from Voya Retirement Insurance and Annuity Co. to transfer the pension benefits of about 5,000 of its U.S. retirees, representing $350 million to $375 million in pension liabilities. Voya was scheduled to begin making benefit payments to those retirees on May 1.
The LIMRA Secure Retirement Institute surveys the 13 financial services companies that provide all the group annuity contracts for the U.S. for its Group Annuity Risk Transfer Survey every quarter.