On July 9, the IRS said it would prohibit lump sum offers to
Smaller Companies Riding The Pension Risk Transfer Wave
cheap moncler Pension transfers from major corporations have made headlines in the past three years with General Motors, Verizon, Bristol Myers Squibb, Motorola and Kimberly Clark transferring their pension liabilities. But pension risk transfers are taking place at an even faster clip among smaller companies, those with between $50 million and $1 billion in sales. cheap moncler
That’s the latest from pension transfer experts at the benefits consulting shop Mercer, which earlier this month released its biennial pension risk transfer survey in conjunction with CFO Publishing.
“Behind the scenes, we’re actually seeing increasing numbers of smaller big headline deals,” Matt McDaniel, a partner with Mercer Retirement, said in an interview with Insurance NewsNet. “We’re seeing much more activity in Moncler Outlet the $50 million to the $1 billion space. That doesn’t necessarily get quite as many headlines.”
buy moncler jackets If interest moncler outlet store rates rise, as many experts expect they will later this year, pension risk transfers among smaller companies is likely to speed up, said Richard McEvoy, a partner with Mercer Investments. buy moncler jackets
cheap moncler jackets “An increase in interest rates could lead to a fast increase in demand for buyouts,” McEvoy said in a news release. “Sponsors need to prepare in advance in order to position moncler outlet jackets themselves to move quickly in response to changing market conditions.” cheap moncler jackets
Mercer found that overall, 36 percent of this year’s finance executives said they are considering an annuity transfer.
The survey found that 9 percent said they are “very likely” and 27 percent said they are “likely” to consider the purchase of an annuity in 2015 or 2016.
moncler outlet sale Results were drawn from 213 qualified responses from finance executives employed at companies and nonprofit organizations with defined benefit plans that had $100 cheap moncler coats million or more in assets. The survey also interviewed 10 senior finance executives at large North American companies with defined benefit plans. moncler outlet sale
moncler outlet store Mercer conducted previous surveys in 2013 and 2011. moncler outlet store
Transferring pension liabilities moncler sale of a pension plan onto an insurance company allows companies with defined benefit obligations to remove the liability from the balance sheet and reduce the volatility of the funded status.
Companies typically remove the pension liability through a lump sum payout or by buying an annuity, moncler outlet online but corporate finance chiefs in the past have shied away from annuities because annuities are perceived as expensive.
That may have been true several years ago.
cheap moncler outlet Today, however, because the relative expense of the pension liability has gone up, annuities aren’t as expensive in relative terms, McDaniel said. cheap moncler outlet
moncler mens jackets Marketplace shifts have changed the pension risk transfer equation involving annuities, according to pension experts. moncler mens moncler jackets outlet jackets
monlcer down jackets For one, the Society of Actuaries over the past year updated its mortality assumptions to reflect increases in longevity. monlcer down jackets
moncler sale For another, funding deficits of defined benefit plans rose last year as aggregate moncler jacket sale funding levels sank 9 percentage points to 79 percent at the end of 2014 from the previous year. government agency that protects 41 million people receiving pension checks from nearly 24,000 private sector defined benefit moncler outlet sale plans. moncler sale
moncler outlet With these changes in mind, here’s how the math works out, according to McDaniel’s example. moncler outlet
moncler sale outlet While a company with a defined https://www.moncler-jacket-outlet.com benefit plan may have carried moncler sale outlet $100 million in pension obligations on its balance sheet every year for each of the last five years, the liability has increased by, say, 10 percent to $110 million. moncler sale outlet
cheap moncler sale At the same time the purchase price of the annuity has remained at $115 million. cheap moncler sale
The annuity is no cheaper, but relative to the company’s pension liability, “You have 5 percent premium instead of a 10 percent premium,” McDaniel said.
moncler outlet online Plan sponsors weight the cost of a pension risk transfer against the cost in cash, cash flows, earnings volatility and the impact on the core business of maintaining the plan. Finance departments often have overstated the costs associated with annuity buyouts, McEvoy said. moncler outlet online
The shift toward annuities has been gradual as plan sponsors either buy an annuity or explore buying them. On July 9, the IRS said it would prohibit lump sum offers to pension plan participants “in pay status,” a development that could further favor annuities.
cheap moncler coats Annuities generally have been cheap moncler outlet more common among companies looking to fund pension payments due people who are already retired, while lump sums have been more common among employees who will receive moncler factory outlet payments in the future, McDaniel moncler outlet said. cheap moncler coats
Results of a separate survey of 183 companies sponsoring a defined benefit retirement plan released earlier this year by retirement and benefits consulting company Aon Hewitt found that 21 percent of companies are considering buying annuities to fund a portion of their obligations to retirement plan participants.
Today, the portion of the marketplace focusing on guaranteed death benefits is moncler outlet uk undergoing a shift toward providing more options and flexibility for policy owners. Global Atlantic’s new Lifetime Foundation ELITE IUL bridges that gap between flexibility and options on the one cheap moncler hand and strong death benefit guarantees on the other because now you can do both.
