Milliman analysis: Competitive pension risk transfer cost decreases from 100.7% to 100.3% in June
19 July 2024 - 11:30PM
Business Wire
Competitive bidding process saves about 3.0%
of buyout costs as of June 30
Milliman, Inc., a premier global consulting and actuarial firm,
today announced the latest results of its Milliman Pension Buyout
Index (MPBI). As the pension risk transfer (PRT) market continues
to grow, it has become increasingly important to monitor the
annuity market for plan sponsors that are considering transferring
retiree pension obligations to an insurer.
During June, the estimated cost to transfer retiree pension risk
to an insurer in a competitive bidding process decreased from
100.7% of a plan’s accounting liabilities (accumulated benefit
obligation, or ABO) to 100.3% of those liabilities. That means the
estimated retiree PRT cost is now 100.3% of a plan’s ABO. During
the same time period, the average annuity purchase cost across all
insurers in our index rose slightly, from 103.2% to 103.3%. The
competitive bidding process is estimated to save plan sponsors
about 3.0% of PRT costs as of June 30.
“After another decline in interest rates this month, pension
risk transfer costs improved slightly from May,” said Jake Pringle,
a Milliman principal and co-author of the MPBI. “The Department of
Labor issued a report to Congress on DOL IB 95-1 outlining concerns
from stakeholders on fiduciary requirements, highlighting several
issues for plan sponsors and fiduciaries to keep in mind as they
work on PRT projects.”
The MPBI uses the FTSE Above Median AA Curve, along with annuity
purchase composite interest rates from nine insurers, to estimate
the competitive and average costs of a PRT annuity de-risking
strategy. Individual plan annuity buyouts can vary based on plan
size, complexity, and competitive landscape.
To view the complete Milliman Pension Buyout Index, go to
https://www.milliman.com/mpbi. To receive regular updates with
Milliman’s pension buyout analysis, contact us at
pensionbuyout@milliman.com.
About Milliman
Milliman is among the world’s largest providers of actuarial,
risk management, and technology solutions. Our consulting and
advanced analytics capabilities encompass healthcare, property
& casualty insurance, life insurance and financial services,
and employee benefits. Founded in 1947, Milliman is an independent
firm with offices in major cities around the globe. Visit us at
Milliman.com.
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Jake Pringle Milliman, Inc. Tel: +1 713 202 0819
jake.pringle@milliman.com