Companies Decide the Time Is Right to Offload Pensions to Insurers

Many Americans who still have a traditional pension—the kind that pays a regular income no matter what the market does—could soon have a different company paying their benefits. U.S. companies owe current and future retirees and their beneficiaries more than $3 trillion, and many have been trying to exit the retirement business for years. Right now they have a golden opportunity to buy their way out.

It’s called a pension risk transfer, or PRT: By buying a financial product called an annuity, a company can essentially place the assets of a plan and the responsibility for paying for it into the hands of a life insurance company. The insurer makes money if it can earn more from investing the assets than it has to pay out. (Another risk-transfer option is to offer to pay benefits in a lump sum; in that case, the risk of ensuring the money lasts is taken on by the pensioner rather than another company.) These deals with insurers aren’t new, but record high markets are making them especially attractive to employers.