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August 22, 2011 at 08:00 PM
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.
