Nearly 90% of U.S. corporations with defined benefit plans look to fully transfer all their liabilities in an average of just four years, according to a new poll conducted by MetLife.
In MetLife's 2023 Pension Risk Transfer Poll, the insurer said 89% of respondents said they plan to fully divest all their liabilities. Among that population, they plan to do so in an average of 4.1 years.
Also, 94% of respondents said they are weighing the DB plan's value against the cost of the benefit, and 91% say the DB plan is receiving "significant attention" from their company's management.
The new poll found that U.S. corporate defined benefit plan sponsors find that macroeconomic concerns are the primary catalysts for transferring their liabilities to an insurance company. When asked for multiple catalysts that can initiate a transfer to an insurer, the highest response — 49% — said inflation, followed by 42% each saying increase in volume of retirees, market volatility and rising interest rates and 35% saying favorable annuity pricing.
"The current environment is favorable for derisking and, if these conditions persist, we anticipate continued growth in the market," says Elizabeth Walsh, vice president, U.S. pensions, MetLife, in an Oct. 3 news release.
"Inflation and rising interest rates continue to be catalysts for plan sponsors to derisk, which is a major shift from the catalysts cited in our inaugural 2015 poll, when plan sponsors reported that Pension Benefit Guaranty Corporation (PBGC) premium increases and the impact of then-new Society of Actuaries' mortality tables were driving activity."
The poll also found that companies are embracing the concept of derisking via multiple pension buyout transactions, with 55% of respondents saying they plan to divest of all their liabilities through multiple transactions, while 45% says they plan to do so with a single transaction. In the 2022 poll, 63% of respondents had said they had planned to do so in a single transaction.
Also, when asked whether they were aware that plan sponsors could split one annuity transaction among multiple insurers, 77% said they were aware of that option, and of that population, 88% said they planned to split their transaction.
MetLife polled executives at 250 corporations with defined benefit plan assets of $100 million or more between July 5 and July 27.
