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Transferring Pension Risk Using Lump-Sum Payments and Annuity Purchases as De-risking Strategies

Executive Summary

Recent actions from several large defined benefit (DB) plan sponsors have sparked renewed interest in de-risking of pension liabilities. A number of de-risking options exist that fall into two main categories.

Retention de-risking uses plan design and investment strategies to help mitigate volatility of unfunded liabilities, but does not remove the underlying pension risk from the plan sponsor entirely. An example of retention de-risking is liability driven investing (LDI).

Transfer de-risking removes pension risk entirely by transferring it to other parties: either to plan participants using lump-sum payments, or to insurance companies by purchasing annuities.

This paper focuses solely on Transfer de-risking options. The de-risking strategy that is right for your organization is dependent on your unique situation and should be carefully crafted together with your financial professional, actuary, accountant, attorney and other professionals on your team.

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Download "Transferring Pension Risk Using Lump-Sum Payments and Annuity Purchases as De-risking Strategies" now (PDF: 341 KB)

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