What do you want to know
- Giant employers are constantly making headlines with massive pension risk transfer deals.
- Employers enter into these agreements using group annuities.
- Prices for small PRT annuities can be similar to prices for jumbo PRT annuities.
The primary concern of any plan sponsor or trustee of a defined benefit plan, regardless of size, is to provide the benefits protected and to act in the best interests of all plan members.
If a sponsor or trustee transfers a portion of the plan’s liabilities to an insurance group through a pension risk transfer annuity purchase or “release” transaction, or if all of the plan is going to be transferred, through a “termination” transaction, the sponsor or trustee must perform due diligence review of the insurance companies involved, in accordance with Department of United States work.
For the purposes of this discussion, we will assume that this due diligence review takes place for a PRT annuity purchase.
Now let’s get to the question posed, “Can small or medium-sized defined benefit plans get the same annuity price as jumbo plans in a PRT annuity purchase?”
The answer is yes.
If the smaller sponsor or trustee follows the same process as larger plans, the likelihood of achieving the same results increases significantly.
Let’s go over some key steps that a larger plan sponsor will follow.
Hiring a PRT Specialist
All major plan sponsors hire a pension risk transfer consultant when considering purchasing an annuity to transfer some or all of the liabilities from the defined benefit plan.
This specialist will identify the processes and timelines specific to purchasing an annuity.
Some key factors to consider are when to hire the PRT consultant and what to look for when hiring the PRT consultant.
The first factor is easy to answer: the sooner the better.
Hiring an independent pension risk transfer consultant early in the process provides more options and organization. More often than not, this will produce a better result.
The second factor – “What to look for when hiring a PRT consultant?” — is a little more difficult to approach.
Many advisors are eager to help plan sponsors with this task, but are they the right ones?
Hiring a PRT consultant is a fiduciary decision, and the plan sponsor or fiduciary must follow certain careful steps when doing so.
Data, data, data
Data is everything.