In recent years we have seen a sharp acceleration in the incidence of annuity purchases by U.S. corporate defined benefit pension plans. Annuity purchase volume exceeded $50 billion in 2022, a far cry from the $1-2 billion annually seen in the industry before 2012. While most of this annuity purchase volume represents the transfer of certain retirees from the plan (rather than all participants), some sponsors may be asking, "Should we be considering a plan termination?"

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; we will define and describe what hibernation is and what it is not. We will explain what it means for benefits policy, funding policy, investment policy, cost management and risk management.

In short, we will re-phrase the question and ask, "What are my choices for managing the risks and costs of my pension plan?" And this broader formulation of the question could lead many plan sponsors to a different conclusion – and potentially also to substantial cost savings.

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