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PBGC actuaries completed a study of risk transfer events (RTEs) in pension plans. Risk transfer, also known as "de-risking," is how companies eliminate their pension benefit obligations. In a risk transfer, a company either pays off participants with a lump sum or buys annuities from insurance companies to replace the company pension.

The study looked at patterns in the data on Form 5500s that pension plan sponsors filed with the government from 2009 - 2013. By using those patterns, the actuaries identified companies that had recent risk transfers.

PBGC is interested in these events because:

  • Lower insurance premium payments may affect PBGC's long-term financial condition. 
  • Past risk transfer activity can help project future activity and help PBGC plan for its effects. 
  • Participants may elect to receive lump sums. If so, policy makers will want to ensure they have the correct tools to manage their funds wisely.

The study looked at about 3,600 larger plans. Of those plans, over 500 had RTEs during the five year period. This is significant because more than one million participants left the plans as a result of the events. Almost 400 of the events involved lump sum payments; the remaining involved annuity purchases to replace the company pension.

Information regarding risk transfer activity has generally been limited to press reports of events conducted by major companies. The study is only an estimate of the level of risk activity since it concludes that a risk transfer has occurred indirectly by analyzing Form 5500 annual reports. PBGC has started collecting data from each pension plan detailing their risk transfer history to accurately determine patterns. We have begun receiving data, and expect to get this information annually from now on.

The study concludes that the plan sponsor's financial condition didn't determine risk transfer activity. Nor did union status. But while union plans and non-union plans were equally likely to offer risk transfers, the percentage of union members accepting them was lower.

Because the actuaries were cautious in declaring a pattern in the data, they think the actual number of risk transfers was probably higher than indicated by the study.

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