Recent years have seen a sharp acceleration in the incidence of annuity buyouts by U.S. corporate defined benefit pension plans. There have been at least six such deals in excess of $1 billion since 2012. Many plan sponsors may feel a need to ask themselves, “Should I be considering a buyout?” But there is a trap in the very phrasing of that question. It excludes any consideration of an important option: plan hibernation.

In this guide, we will:

  • Correct that omission
  • Define and describe hibernation
  • Explain what it means for benefits policy, funding policy, investment policy, cost management

Then we will re-phrase the question and ask, “What are my choices for managing the risks and cost of my pension plan?” This broader formulation of the question will lead many plan sponsors to a different conclusion – and potentially also to substantial cost savings.

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