In 2012, Ford, GM and Verizon all made landmark risk transfer transactions including lump sum cashouts and annuity purchases. Before that time, annuity purchases were rarely used. As funded status has improved, annuity purchases have since picked up significantly as more sponsors are considering ways to reduce the overall risk of the plan to the organization, and to reduce the plan's footprint.
Since much of the low-hanging fruit of risk transfer has already been picked, we have observed that some advisors have become more creative and aggressive in pushing risk transfer when not necessarily warranted or in the long-term best interest of the sponsor. Having a broader understanding of what issues may arise will help plan sponsors know when risk transfer makes sense.
In this paper, we discuss strategies to avoid and which opportunities may be attractive as defined benefit (DB) plan sponsors work toward their endgames.Download research