During the month of September, the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process climbed to 101.7% of a plan’s accounting liabilities from 100.8% of those accounting liabilities as of the end of August, according to the latest Milliman Pension Buyout Index issued on Oct. 22 by consulting and actuarial firm Milliman.
The latest data means the estimated retiree PRT cost is now 101.7% of a plan’s accumulated benefit obligation, or ABO, Milliman explained in a release issued in conjunction with the index results.
Also, during September, the average annuity purchase cost across all insurers in the index edged up to 104.4% from 104.1%. The competitive bidding process is estimated to save plan sponsors about 2.7% of PRT costs as of Sept. 30, Milliman added.
"In September, we saw IBM announce a $6 billion PRT transaction, a good indication that the market will remain active as we enter the fourth quarter of another busy PRT year," said Jake Pringle, a Milliman principal and co-author of the index, in the release.
The index uses the FTSE Above Median AA Curve, along with annuity purchase composite interest rates from nine insurers, to estimate the competitive and average costs of a PRT annuity de-risking strategy.
