Number of plans passing off liabilities expected to rise
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • KKR lifts out 3 to focus on clean energy infrastructure
      Richard Johnson
      Appian Capital Advisory adds global investor relations head
      Alternative investment funds faced liquidity squeezes in COVID-19 crisis and 2019
      CI Financial launches global real estate, infrastructure joint venture
    • Callan brings on 2 executives
      Hub International agrees to buy Plan Sponsor Consultants
      Aon names public markets solution leader
      Deloitte to acquire Sydney-based consulting firm Rice Warner
    • BofA: Most managers bullish on economy, markets
      Alternative investment funds faced liquidity squeezes in COVID-19 crisis and 2019
      Jerome Powell, chairman of the Federal Reserve, listens during a Senate Banking Committee hearing in Washington on Dec. 1, 2020
      Fed saw some time before taper conditions met – minutes
      International Monetary Fund and World Bank spring meetings signage at the IMF headquarters in Washington
      IMF upgrades global growth forecast, warns of diverging recoveries
    • Pentegra launches pooled employer plan
      Teresa Hassara
      Ascensus taps MassMutual alum as new FuturePlan president
      Economic Group Pension Services scoops up third-party administrator
      OregonSaves gathers $100 million in assets
    • Tracker gives investors insight into progress on social commitments
      Shoppers wear protective masks while visiting an Apple Inc. store at George Street in Sydney, Australia, on June 24, 2020.
      Apple backs SEC mandate on climate disclosure
      Emissions rise from the Kentucky Utilities Co. Ghent generating station in Ghent, Ky.
      Investors, businesses call for ambitious emissions goals
      Signage for Temasek Holdings Pte. is displayed during a news conference following the company's annual review in Singapore
      Temasek, BlackRock partner to launch carbon-cutting funds
    • Ken Griffin
      Ken Griffin donates $5 million to give Miami students internet
      New book culls institutional wisdom from podcast series
      Fearless Girl
      SSGA’s Fearless Girl statue now shattering glass ceiling
      Tangen video
      Norges chief dons chef’s hat to boost employees’ spirits
    • Karen Karniol-Tambour
      Bridgewater appoints 2 co-CIOs to oversee new sustainable investing group
      Hedge funds post best first-quarter return since 2000
      Jason Kephart
      Managers see good times ahead in 2021
      Jev Mehmet, CEO of Brevan Howard's Coremont unit
      Brevan Howard runs $50 billion unit like BlackRock’s Aladdin
    • Connecticut earmarks $200 million to 4 alts funds
      Karen Karniol-Tambour
      Bridgewater appoints 2 co-CIOs to oversee new sustainable investing group
      SSGA selects head of continental Europe for global institutional group
      Ontario Municipal promotes from within for new global equities exec
    • SSGA selects head of continental Europe for global institutional group
      BofA: Most managers bullish on economy, markets
      The Absa Group logo displayed in Pretoria
      Absa shuts $6 billion mutual fund, sparking spinoff speculation
      Mirova adds proxy voting and engagement leader
    • Ontario Municipal promotes from within for new global equities exec
      Kansas City Employees adopts global strategy with small-cap swing
      Michael C. Viteri
      Arizona appoints new CIO
      A £10 sterling bank note with a pound coin and a ballpoint pen, with focus on the word 'pension.'
      U.K. defined benefit plans’ surplus surges in March
    • Karen Karniol-Tambour
      Bridgewater appoints 2 co-CIOs to oversee new sustainable investing group
      SSGA selects head of continental Europe for global institutional group
      Ontario Municipal promotes from within for new global equities exec
      Mirova adds proxy voting and engagement leader
    • Bills of euro, dollar and pound currencies, among others
      Ardian closes latest buyout fund at $8.8 billion
      Hand typing on stationary iPhone at an office reception desk
      Private equity’s taste for tech spurs $80 billion deal spree
      Vista Equity promotes 2 to leadership roles on 2 funds
      Azimut takes minority stake in HighPost
    • CalSTRS indutrial property
      Investors hungry for industrial properties
      Tim Wang
      GLP names co-president of logistics, industrial real estate for China
      Frank Forster
      StepStone Real Estate adds managing director for Europe
      Christine Iacoucci
      BentallGreenOak promotes from within to fill Canadian CIO role
    • Andy Schreiner
      New PEPs targeting firms without retirement plans
      Jackie Walorski
      Contribution catch-up for caregivers gaining favor
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Neal and Brady
      Retirement security could be only issue both sides accept
    • Corporate pension contributions
      Eddy Awards 2021
      COVID-19: One year in
      Charging Bull, sometimes referred to as the Wall Street Bull or the Bowling Green Bull, a bronze sculpture that stands on Broadway just north of Bowling Green in the Financial District of New York City
      Top-performing managers Q4 2020
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Connecticut earmarks $200 million to 4 alts funds
      Orlando pension funds pick Axiom for emerging markets equity
      St. Louis Public Schools assigns $5 million to value-added real estate
      BayerInvest taps BlackRock to run ESG-focused private debt allocation
    • Connecticut earmarks $200 million to 4 alts funds
      Orlando pension funds pick Axiom for emerging markets equity
      St. Louis Public Schools assigns $5 million to value-added real estate
      BayerInvest taps BlackRock to run ESG-focused private debt allocation
    • Passive Investment Management Services
      Active Extended Global Credit Manager Search
      Actuarial Services
      Investment Management Services
    • Managed account adoption stalls in 2020
      U.S. bonds have worst quarterly return since 1981
      Stable value retains edge over money market funds
      Taiwan Semiconductor’s No. 1 in the emerging markets book
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • CalPERS cartoon
      Urgency underscores CalPERS' search for a CIO
      Multiemployer plans cartoon
      Money — but no fixes — for multiemployer plans
      Vaccination cartoon
      Rallying to meet the ongoing COVID-19 challenge
      Tesla cartoon
      Don’t confuse wealth creation with retirement saving
    • Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
      COVID-19 Makes LP Portfolio Management More Important Than Ever
      China: the outlook is bright for longer-term investors
      Finding Differentiation in Securitized Assets
    • Greg Shea and Steven Kindred
      Commentary: The solution for yield-seeking allocators may be hiding in plain sight
      Jim Park
      Commentary: Asian Americans, Pacific Islanders face ‘bamboo ceiling’ in money management
      Jared Gross
      Commentary: Anchors and allocations – breaking the grip of 60/40
      Peter Marber
      Commentary: Is it time for an emerging markets rally?
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • P&I Content Solutions
      Research for Institutional Money Management
      P&I Content Solutions
      Top questions for institutional investors
      Sponsored Content By Newton Investment Management
      Growth and Innovation in Emerging Markets
      P&I Content Solutions
      In Challenging Markets, Systematic Global Macro Strategies Could Hold Opportunity
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      1:23
      The passive fixed-income glut
      watch video
      1:38
      Is it time for DC plans to embrace private equity?
      watch video
      5:39
      The coronavirus pandemic: One year later
      watch video
      0:45
      Private funds weathered 2020 turmoil
    • New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Understanding the PEP Evolution
      Divest or engage?
      Innovations in DC: Helping supercharge retirement outcomes
    • POLL: The Biden infrastructure plan
      POLL: Retirement income solutions
      POLL: Working after the pandemic
      POLL: The year ahead for the 1,000 largest U.S. retirement funds
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • Managed account adoption stalls in 2020
      U.S. bonds have worst quarterly return since 1981
  • Events
    • Conferences
    • Webinars
    • DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • New Outlook on Income: A Framework for Evaluating DC Retirement Income Solutions
      Understanding the PEP Evolution
      Divest or engage?
      Innovations in DC: Helping supercharge retirement outcomes
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. PENSION RISK TRANSFER
October 28, 2019 12:00 AM

Number of plans passing off liabilities expected to rise

Rob Kozlowski
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Michael Moran
    Michael Moran said volatility in funded status is holding some back.

    The number of pension risk transfer deals, including those involving full plan terminations, is expected to rise this year, sources said.

    Even so, U.S. corporate pension plans are expected to transfer a total of about $25 billion in liabilities to insurance companies in 2019, consistent with last year.

    The total for 2018 was about $27 billion, according to the annual LIMRA Secure Retirement Institute survey. Despite the similar dollar amounts, the number of deals will likely increase significantly, said Matt McDaniel, Philadelphia-based U.S. leader of Mercer LLC's financial strategy group, in a telephone interview.

    "Last year had one particularly jumbo deal," Mr. McDaniel said, "This year we have probably a little bit more activity in terms of the number of deals but not quite as many mega jumbo deals."

    In the first half of this year, the 17 insurance companies that sell annuity contracts to U.S. pension plans reported 190 contracts sold compared with 158 contracts during the same period last year, according to LIMRA data.

    More than a quarter of last year's total dollar amount came from one deal. FedEx Corp., Memphis, Tenn., purchased a group annuity contract with Metropolitan Life Insurance Co. in 2018 to transfer about $6 billion in U.S. pension plan obligations, the largest U.S. transaction since Verizon Communications Inc., New York, purchased a group annuity contract from Prudential Insurance Co. of America in 2012 to transfer $7.5 billion in U.S. pension plan obligations.


    Baxter International

    So far, the largest announced U.S. transaction in 2019 not involving a full plan termination came from Deerfield, Ill.-based Baxter International Inc., which disclosed on Oct. 10 it had entered into an agreement with Prudential to purchase a group annuity contract transferring $2.4 billion in U.S. pension plan liabilities.

    While not the kind of jumbo deal FedEx represented, Baxter's buyout transfers a full 50% of its global pension plan liabilities, which as of Dec. 31 totaled $4.8 billion, according to its most recent 10-K filing. Baxter officials did not reply to requests for further information.

    "Risk management and pension risk transfer remain very much top of mind for plan sponsors," Mr. McDaniel said. "They are as interested as ever in evaluating the trade-offs of removing liabilities from the books vs. managing their risks internally."

    The volatility in funded status, however, has forced some to put their plans on hold, said Michael Moran, New York-based senior pension strategist at Goldman Sachs Asset Management, in a telephone interview.

    "(They) would have to make a contribution (they're) not ready to make at this point," Mr. Moran said.

    The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies was 83%, down from 85% at the end of 2018, according to Mercer.

    Market volatility also has added to client frustrations with the timing of actions on glidepath triggers in their liability-driven investment strategies, Mr. Moran said.

    "Just when they had those moments in time, they were not able to act on a rise in funding levels at that time to effectuate a change in asset allocations," he said. "They kind of missed that window of opportunity to derisk and that's been a source of frustration for a lot of clients."

    Mr. Moran said some plans lack the internal capabilities to make swift decisions in a volatile environment, which is why more plans are switching to outsourced chief investment officer firms.


    Plan terminations

    One trend in the pension risk transfer landscape that has seen increased activity is full pension plan terminations, experts say.

    "We definitely continue to see an increase in the numbers of the plan terminations," said Ari Jacobs, Chicago-based senior partner and global retirement solutions leader at Aon PLC, in a telephone interview. "I think some of that still relates to the large amount of funding that went into pension plans a year ago because of tax relief."

    Many U.S. corporations made several years' worth of pension contributions before Sept. 15, 2018, the deadline to deduct portions of the contributions at the old corporate tax rate of 35%. President Donald Trump signed the Tax Cuts and Jobs Act, which reduced the rate to 21%, in December 2017.

    This year saw the largest-ever voluntary U.S. pension plan termination when New York-based Bristol-Myers Squibb Co. terminated its $3.8 billion pension plan and transferred the full amount of liabilities through a group annuity contract purchased from Athene Annuity and Life Co.

    There were 18,000 former employees who had yet to retire, 4,800 active employees, and 1,400 retirees and their beneficiaries in the plan.

    Bristol-Myers Squibb had the advantage of being 100% funded. While interest rates have declined, increasing liabilities, most plans have managed to keep their funding levels up thanks to moderately strong investment returns, experts say.

    Another recent completed termination was that of Brunswick Corp., Mettawa, Ill., which announced in August it had made settlement payments totaling $596 million to complete termination of two U.S. defined benefit plans.

    The settlements included the purchase of a group annuity contract from an undisclosed insurance company and $77.1 million in lump-sum payments elected by eligible participants.

    "We're seeing a tremendous uptick in plan terminations coming off of last year, generally speaking, with contributions up and funded status generally improved," said Kim Rosenberg, head of distribution and retirement solutions, U.S. retirement, at Legal & General America, Stamford, Conn., in a telephone interview.

    "They took all the risk off their tables and they became well funded in a very short period of time," she said. "We've seen that begin to trickle in this year, a pretty significant increase in plan terminations year-over-year and we continue to see that next year and beyond."

    Mr. Jacobs also sees an increase in plan terminations, noting that many plans have moved far enough along in their derisking paths that interest rate fluctuations don't make as much of an impact on funded status as they might have a few years ago.

    It is still more common, however, that annuity purchases will transfer retirees only, which has traditionally been a more simple transaction.

    "Quite a few clients have started with a single strand, a fairly simple retiree-only transaction instead of a full tranche to test the waters," Ms. Rosenberg said.

    Most plans in general still transfer the liabilities of retirees whose monthly benefits are small, which in recent years have been executed primarily to reduce plans' head counts because of rising fixed-rate premiums to the Pension Benefit Guaranty Corp.

    The fixed rate, which is measured per participant, was $35 in 2012, but is now $74 per participant and will be $83 in 2020.


    Shock has abated

    Matt Herrmann, St. Louis-based head of the retirement risk management group at Willis Towers Watson PLC, said in a telephone interview that while reducing the impact of PBGC premiums is still a priority for plans, the shock of rising premiums has abated.

    "Generally speaking, plan sponsors are going to make good economic decisions when you think about the economics of some of these administrative costs such as PBGC premiums," Mr. Herrmann said.

    PBGC premiums are still driving activity, but the high premiums are "not as much of a surprise'' as they once were.

    Overall, the pension risk transfer market has matured, Mr. Jacobs said, and he noted that despite the steady activity, the $25 billion in liabilities being transferred this year is still a tiny fraction of the overall U.S. pension plan liability landscape.

    Related Articles
    Brink’s buys annuity to transfer $54 million in liabilities
    Owens Corning buys annuity to transfer $89 million in U.S. pension liabilities
    Baxter transfers $2.4 billion in pension liabilities
    Recommended for You
    GM shifts $1.4 billion in Canadian pension liabilities to insurers
    GM shifts $1.4 billion in Canadian pension liabilities to insurers
    ABI Pension & Assurance Scheme completes $36 million buy-in with Aviva
    ABI Pension & Assurance Scheme completes $36 million buy-in with Aviva
    U.K. expects a strong year for offloading of liabilities
    U.K. expects a strong year for offloading of liabilities
    Fixed income 2021
    Sponsored Content: Fixed income 2021
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Bipsync Client Stories: RMS in Action at Pensions and Superannuation Funds
    COVID-19 Makes LP Portfolio Management More Important Than Ever
    China: the outlook is bright for longer-term investors
    Finding Differentiation in Securitized Assets
    Green and sustainable bonds in emerging markets
    Portfolio Protection: One Size Fits None
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    April 5, 2021 Page One

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center