Plan sponsors increasingly interested in pension risk transfer

par Donna Glasgow | March 27 2017 07:00AM

Photo: Freepik

In the United States, 80 per cent of employers sponsoring traditional defined benefit pension plans are interested in pension risk transfer, according to new research from LIMRA Secure Retirement Institute.

 LIMRA says that in the last few years a shift has occurred in the level of interest in pension risk transfer (PRT). While eight in 10 plan sponsors expressed interest in PRT, four in 10 said they are “very interested”. This is an increase of ten per cent from a 2014 study by LIMRA.

PRT enables employers to transfer all or part of their pension liability to an insurer. “In doing so, an employer can remove the liability from its balance sheet and reduce the volatility of the plan’s funded status,” explains LIMRA.

For employers who said they are not interested in PRT, lack of knowledge is the top reason given (40 per cent), says LIMRA. Another quarter said they are addressing pension risk in other ways.

More than a quarter of employers with defined benefit plans say low interest rates (that make it hard for sponsors to keep plans adequately funded) dissuade them from considering PRT, says LIMRA. 

The study also showed that eight in 10 defined benefit plans are less than 90 per cent funded.

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