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The Multi-Million Dollar Opportunity for Pension Plan Sponsors

Ongoing price monitoring during the pension risk transfer transaction process can drive improved outcomes.

Until recently, the pension risk transfer (PRT), or pension annuity buy-out market averaged less than $5 billion of transactions per year, mostly comprised of very small transactions resulting from pension plan terminations, which meant that insurer pricing deviations were often financially immaterial to most companies sponsoring those plans. As a result of fairly rigid plan termination timelines, annuity purchase transactions almost exclusively followed the same process; i.e., the plan sponsor and its advisors picked a date months in advance to get final insurer pricing, allowing for sufficient time to offer a lump sum window and comply with all necessary stakeholder communications. Unless there were delays in any of those steps, the final annuity pricing and annuity purchase dates rarely changed.

Under those conditions, this approach to PRT transactions was likely appropriate, but recently, it has become much more common for plan sponsors to explore or execute very large, discretionary PRT transactions. As an indication, the total transaction volumes in 2016, 2017 and 2018 were $14 billion, $23 billion and $26 billion, respectively, up from $4 billion in 2013. In addition, the average transaction size has more than tripled from 2013 to 2018*.

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*LIMRA Secure Retirement Institute quarterly data for U.S. single premium pension buy-out product sales.

Athene has two licensed insurance companies that issue group annuity contracts to assume certain benefit liabilities from pension plans: Athene Annuity and Life Company, headquartered in West Des Moines, Iowa and licensed in 49 states (excluding NY) and D.C., and Athene Annuity & Life Assurance Company of New York, headquartered in Pearl River, New York and licensed in 50 states and D.C. Payment obligations and guarantees are subject to the financial strength and claims-paying ability of the issuing company. Products may not be available in all states.

Group annuity contracts contain exclusions and limitations. Contact the company for costs and complete details.

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