The event seemingly portended seismic implications for the U.S. corporate defined benefit plan landscape, which had already experienced well over a decade of plans closing and freezing benefit accruals. It was by far the largest such transaction completed in the U.S. and remains so, and it initiated a growing, decadelong trend of purchasing annuities to transfer pension liabilities.
The significance of the trend was reiterated in September when International Business Machines Corp., Armonk, N.Y., purchased group annuity contracts from Prudential and Metropolitan Life Insurance Co. to transfer a total of $16 billion in U.S. defined benefit plan liabilities. It was the largest buyout since the GM deal and was the second largest of all time.
IBM spokesman Timothy F. Davidson said the company had nothing to add to what's been publicly disclosed in a Sept. 13 8-K filing with the SEC.
According to data from research firm LIMRA, since the beginning of 2013, U.S. corporate DB plans transferred a total of $191.6 billion in liabilities to insurance companies through June 30 of this year, and the September IBM deal brings that total to over $200 billion through Sept. 30.
However, that total volume still pales when compared with the total assets still remaining among corporate plan sponsors, said Matt McDaniel, Philadelphia-based partner in Mercer's wealth business, in a phone interview.
For the majority of the corporate pension plan market that has decided to close plans and freeze benefit accruals, they continue to hold their assets.
"It is a long farewell, but it is a very long farewell," Mr. McDaniel said. "Just because these plans are going away eventually, eventually is a very long time. There is typically another 50 to 75 years where they are going to be paying out benefits to participants."
It means for decades to come, U.S. corporations on some level will still have to make investment management decisions regarding these asset pools.
"Some have the impression that DB plans are totally dead and gone, but that's not the case," said J. Mark Iwry, former senior adviser to the secretary of the Treasury and deputy assistant director for retirement and health policy and currently non-resident senior fellow at the Brookings Institution, in a phone interview. "While private-sector employers in the U.S. and abroad have been continually freezing and risk-transferring away from DB plans for many years, existing DBs continue to cover plenty of public-sector and union-represented employees, and some non-union private-sector employees."