U.S. pension plan buyouts reach record volume in 2022

U.S. corporate pension plan buyout sales totaled a new all-time high of $48.3 billion in 2022, a LIMRA survey found.

The new all-time high for U.S. pension buyout sales topples the previous record of $36 billion set in 2012 and is up 42% from the 2021 volume total of $34.2 billion.

The total number of buyout contracts also hit an all-time high, reaching 562 for all of 2022, which well exceeded the previous record of 500 contracts set in 2019.

"Rising interest rates and equity market volatility created an attractive environment for single premium buy-out sales in 2022," said Mark Paracer, assistant research director, LIMRA annuity research, in a news release Tuesday. "While there were a couple of jumbo deals ($1 billion+), the record high number of contracts suggests broad interest from plan sponsors of all sizes. The higher interest rates improved plans' funding status, enabling more employers to mitigate their risk through a pension risk transfer solution."

For the fourth quarter, buyout sales totaled only $7.2 billion, down 42% from the fourth quarter of 2021. Historically, the majority of buyout sales have taken place in the fourth quarters of previous calendar years.

For 2022, a full third of the volume came from a single transaction. In September, International Business Machines Corp., Armonk, N.Y., completed the second-largest U.S. pension buyout transaction in history when it purchased group annuity contracts from Prudential Insurance Co. of America and Metropolitan Life Insurance Co. to transfer a total of $16 billion in U.S. defined benefit plan liabilities.

Also in the fourth quarter, LIMRA said there were three single premium buy-in contracts totaling $894 million. Pension buy-in transactions, in which an insurer reimburses the company for benefit payments the plan will make to its retirees and beneficiaries, are very common in the U.K., but rare in the U.S. In 2022, there were a total of seven buy-in contracts worth a total of $3.6 billion.

LIMRA surveyed the 20 financial services companies that provide all the group annuity contracts for U.S. corporate pension plans.