Pension Transfers

Pension Transfers

A salesperson often gets asked, “What’s the largest case you’ve ever written?” My answer is always that I haven’t written it … YET. However, that time may be coming soon. Due to changes in the pension environment, I think we should get into position to write large cases in 2016 and 2017. 

Significant changes in the pension landscape make it a great time to discuss transferring the plan’s risk to an insurance carrier. First, due to the continued bull market, plans have increased in value. February’s corporate plan funding index increased to 87.5 percent after posting its best 30-day performance since January 2011.1 

With plans closer to being fully funded, business owners must write a smaller check to reduce or eliminate the risk from the balance sheet. Along those same lines, rising interest rates in the future will erode the bond valuations of current plans, making it more costly to transfer the risk. Now is the right time to have the conversation. 

Second, the Society of Actuaries has suggested – and Congress has approved – the change in actuarial assumptions in pension plans. It is expected that the actuarial changes alone will negatively affect funding levels by as much as 8 percent.2,3 Due to the length of time it takes to move a plan to a carrier from Department of Labor standards, most plans will likely be affected by this.  

Finally, premiums for the Pension Benefit Guaranty Corporation are on the rise, with plans paying $49 per participant in 2014, $57 in 2015 and $64 in 2016. Underfunded plans also pay a variable premium per $1,000 underfunded of $14 in 2014, $24 in 2015 and $29 in 2016.4 These premiums will increase the overall cost of maintaining a fully funded plan by more 30 percent and significantly more for underfunded plans.

If you are looking for a way to talk to business owners, and at the same time write a big case, consider exploring the pension termination marketplace. The time is ripe for advisors to bring business owners a solution to that is ready to help them in 2016.  

The Bottom Line: Look at the pension termination market for the opportunity to write larger cases in 2015 and 2016.  


1BNY Mellon

2Society of Actuaries


4Pension Benefit Guaranty Corporation