The estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process edged up to 101.7% from 101.6% of a plan’s accumulated benefit obligation during the month of February, according to the latest results of the Milliman Pension Buyout Index issued on March 25.
Also, during the month of February, the average annuity purchase cost across all insurers in Milliman’s index remained level, at 104.3%. The competitive bidding process is estimated to save plan sponsors about 2.6% of PRT costs as of February 28, the global consulting and actuarial firm added.
“LIMRA (Life Insurance Marketing and Research Association) recently released U.S.-based PRT results for 2024, and despite a slower fourth quarter it was a record-setting year for contracts,” said Jake Pringle, Milliman principal and co-author of the MPBI, in the release. “The industry saw 794 single-premium contracts for the year, representing almost $52 billion in premiums paid to insurers. As we near the end of (the first quarter) with steady retiree buyout costs and high insurer capacity, plan sponsors may find this is an opportunistic time to pursue PRT projects.”
The Milliman Pension Buyout Index uses the FTSE Above Median AA Curve and insurers' composite interest rates to estimate the average cost of pension risk transfer transactions.
