Just as some high-profile public pensions struggle to meet their obligations, more and more private DB plans are expected to offload some of their risk to insurance providers and money managers. As funding for DB plans grows healthier due to the rising stock market, more plans may be looking to lower their obligations by either offering lump sum payments or offloading liabilities to insurance providers. But some may be waiting on guidance from the DOL — as recommended by the ERISA Advisory Council — before they take the leap.
Pension risk transfer deals have slowed down in 2013, with plans with less than $5 billion more likely to make the move, according to a recent Towers Watson survey. However, many companies have in place what’s known as a “journey plan,” which triggers de-risking strategies as funding status improves.
Some speculate that DB plans are waiting for interest rates to rise — a trend that may not necessarily be imminent. Others criticize offloading liabilities to private insurers, since PBGC protection is lost. Will the recent federal budget deal, which increased PBGC premiums, hasten the exodus from DB plans?
