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Risk Management

MetLife: Most corporate DB plans with derisking goals intend to divest all pension liabilities

Most corporate defined benefit plans with derisking goals intend to divest all of their companies' pension liabilities in the future, results of a survey released by MetLife showed. MetLife's 2019 Pension Risk Transfer Poll, released Thursday, revealed that 76% of defined benefit plans with derisking goals intend to completely divest all of their companies' DB plan liabilities at some point in the future, with 33% intending to do so in the next five years.

"This is the strongest indication of how the intentions of (corporate) plan sponsors have shifted," Wayne Daniel, senior vice president and head of U.S. pensions at MetLife, said in an interview. "In the past, it's typically been, 'Yeah, we might think about it,' but now, more than three-quarters of plan sponsors are stating they want to completely divest of all their defined benefit liabilities."

Of the 67% of plan sponsors considering a risk transfer within the next two years, 77% have evaluated the financial impact of a pension risk transfer, while 74% have held discussions with key stakeholders, 65% have engaged in data review and cleanup, and 59% have explored the solutions available in the marketplace and/or quantified the cost of a pension risk transfer.

"Managing a pension plan continues to be a distraction. It puts you in the pensions business, it puts you in the insurance business, it distracts you from your core business," Mr. Daniel said. "Companies would rather focus on their core business and what's important to them. So, if they could divest from these liabilities, then that would be their preferred position."

Most plans surveyed – 79% – are more likely to consider an annuity buyout now that there have been several large, well-publicized instances of major corporations entering into annuity buyout deals with insurers. Two-thirds of respondents – 67% – said they will use annuity buyouts to de-risk, up from 57% in MetLife's 2017 Poll results.

The MetLife 2019 Pension Risk Transfer Poll was conducted Aug. 13 to Sept. 27 by MMR Research Associates in cooperation with Strategic Insight. Survey responses were received from 102 corporate DB plan sponsors with derisking goals.