During the month of December, the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process declined from 101.8% of a plan's accounting liabilities to 100.5% of those liabilities, according to the latest Milliman Pension Buyout Index released on Jan. 31 by consulting and actuarial firm Milliman.
Millman explained in the release that the estimated retiree PRT cost is now 100.5% of a plan's accumulated benefit obligation, or ABO. Over this same period, the average annuity purchase cost across all insurers in the index also decreased, to 103.1% from 103.9%. The competitive bidding process is estimated to save plan sponsors about 2.6% of PRT costs as of Dec. 31.
"Retiree buyout costs open 2024 at their lowest level in almost six months despite another sizable drop in accounting discount rates," said Jake Pringle, a Milliman principal and co-author of the MPBI. "That, combined with the reset in insurer capacity as 2024 gets underway is likely welcome news for plan sponsors looking at PRT projects in the new year."