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Dietrich: Pension Disposal Climate So-So

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Defined-benefit pension plan sponsors may find that current annuity rates make shedding unwanted pension obligations possible but not especially appealing.

The Pension Risk Transfer Index now stands at 90.1, meaning that this is not as bad a time to close out a plan by buying an annuity as it was during the period from September 2010 to January 2011 but not as attractive of a time to annuitize as it was in 2008 and 2009.

Dietrich & Associates Inc., Plymouth, Mass., a pension risk-transfer firm, created the index to give employers an indicator they can use to decide when to annuitize pension obligations.

The funded status level of the typical plan has a 50% weight in the index formula. Current and past annuity rates have a 30% weight, and the spread of annuity rates over Treasury bonds and corporate bonds has a 20% weight.

Dietrich analysts have used historic data to calculate annual index figures going back to 2008.

The index stood at 110.6 in January 2008, rose to 121.4 in January 2009, then fell to 91.5 in January 2010. The index has stayed under 93 since January 2010.

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