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Plan Sponsors With De-risking Goals Want to Dump All Their Pension Liabilities: MetLife 

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What You Need to Know

  • Catalysts for initiating a pension risk transfer to an insurer include interest rates, 61%; market volatility, 47%; and increased volume of plan retirees, 37%.
  • The pandemic does not appear to be negatively influencing plan sponsors’ desire to move forward with a pension risk transfer.
  • The poll’s findings also highlighted the importance of stability and financial strength in the eyes of plan sponsors.

Pension risk transfer transactions will remain robust for the time being, MetLife reported Tuesday.

Ninety-three percent of plan sponsors with de-risking goals in a new poll say they intend to completely divest all of their company’s defined benefit pension plan liabilities at some point in the future, up from 76% in 2019.

The poll found that among those plan sponsors that plan to fully divest their DB plan liabilities, 32% have DB plan assets of $1 billion or more, 35% have assets in the $500 million to $999 million range and 33% have assets in the $100 million to $499 million range. 

“The PRT pipeline remains very active, and we anticipate this will continue in the near future and beyond, with 2021 potentially being another record year for the industry,” Melissa Moore, senior vice president and head of annuities at MetLife, said in a statement. 

MMR Research Associates fielded the MetLife 2021 Pension Risk Transfer Poll in July among 253 DB plan sponsors, including 68% that reported DB plan assets of $500 million or more. Only those plan sponsors with de-risking plans involving pension risk transfer could participate in the research.

Catalysts for Pension Risk Transfer 

The poll found that 91% of plan sponsors are weighing their DB plan’s value against the risks to which it exposes their organization. 

Asked about the primary catalysts for initiating a pension risk transfer to an insurer, 61% cited interest rates, 47% market volatility, 37% an increase in volume of a plan’s retirees and 35% favorable annuity buyout market pricing. 

The ongoing pandemic does not appear to be negatively influencing plan sponsors’ desire to move forward with a pension risk transfer, according to the survey. 

Forty-seven percent reported that there had been no change to their de-risking plans due to the pandemic, with 42% saying COVID-19 has actually increased or accelerated the likelihood they would transact. 

Only 11% said the pandemic has decreased or delayed the likelihood of entering into a transaction, down from 19% last year. 

Selecting an Insurer 

The poll’s findings also highlighted the importance of stability and financial strength in the eyes of plan sponsors. 

When asked to rank the most important consideration when selecting an insurer for an annuity buyout transaction, 33% of respondents cited financial strength of the insurer as the most important, followed by 23% who said the price/cost of the annuity buyout transaction, 22% who said brand/reputation and 18% who cited administrative experience of the insurer. 

“It’s important for plan sponsors to look for a strong partner when pursuing a pension risk transfer,” Moore said. “Plan sponsors should look to partner with an insurer that has been in the business a long time, has demonstrated the ability to seamlessly onboard large blocks of participants, and has proven that they can weather volatile economic environments and still remain strong.” 

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