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Thinking of “De-Risking”? You Might Have to Think Again….

July 20, 2015

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benefitsbclp

Thinking of “De-Risking”? You Might Have to Think Again….

July 20, 2015

by: benefitsbclp

While pension plans as a whole are heading toward extinction, many employers haven’t been able to terminate their plans for a variety of reasons – including collective bargaining mandates and underfunding status which precludes termination.  Employers in this situation are left confronting the pressure to move the risk from the corporation’s balance sheet to the individuals covered by the plan.  This risk mitigation concept is generally referred to in the industry as pension “de-risking”.  One common de-risking strategy has been to offer a limited time period during which individuals in pay status can elect to forego future annuity payments and receive an accelerated lump sum payment that is the actuarial equivalent of their remaining annuity payments (sometimes referred to as a “lump sum risk transferring program”).

De-risking has been met with resistance from Congress and the agencies tasked with overseeing pension matters – PBGC, IRS, Treasury and DOL; these governmental

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De-Risking? The PBGC Wants to Know About It

April 1, 2015

Authors

Denise Erwin

De-Risking? The PBGC Wants to Know About It

April 1, 2015

by: Denise Erwin

Risk BoggleIn the past few years, several large pension plan sponsors have sought to decrease the risk associated with their pension plans by purchasing group annuities to cover future payments or by offering a lump sum window during which eligible participants were permitted to elect a cash lump sum buyout. Many other plan sponsors are considering following suit. This trend has been accelerating in response to higher PBGC premiums, lower interests rates and updated mortality tables reflecting increased longevity.

The PBGC has an interest in tracking this activity because the decrease in the number of participants reduces the per-participant premiums collected by the PBGC making it more difficult for it to fulfill its role in protecting pension benefits. As a result, beginning with the PBGC premium filings for 2015,

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