Pension Risk Transfer Solutions
What is Pension Risk Transfer?
For years now, companies have been transitioning away from traditional pension retirement plans – also known as defined benefit plans – due to the significant costs and fiduciary responsibility involved in managing these plans.
These are precisely the types of companies that Cairnavigate has expertise in guiding their transition to more financially viable options by reducing their pension risk.
Pension risk transfer is essentially comprised of a defined benefit plan whose sponsor seeks to remove or transfer the financial liability of that plan to an approved life insurance carrier. This transfer occurs with the purchase of annuity contracts issued by a life insurance carrier to cover the benefit payments for life per the defined benefit plan.
Benefits of Pension Risk Transfer
Companies with defined benefit plans can reap several benefits from pension risk transfer:
- Economic downturns can negatively impact defined benefit plans’ funding status, forcing companies to make significant contributions in an economically challenging environment.
- Defined benefit plans require significant capital that can take away from revenue-generating activities, which is ultimately why the company exists in the first place: to sell to customers and make a profit.
These low rates contribute to lower returns and increased liabilities, creating a financial drain on the company.
Pension risk transfer eliminates the fiduciary role a company plays in managing the pension plan.
- Pension risk transfer enables the insurance carrier to manage investment risk and longevity (aging) risk, which it is already accustomed to managing as an insurance provider.
Pension Risk Transfer Process
With our decades of experience, Cairnavigate helps make the process for pension risk transfer seem easy:
Establish and review the transaction framework to set goals. When planning a full or partial plan termination, its important the plan sponsor understands all the steps needed to achieve the desired result. Careful planning will help plan participants more easily transition to a lifetime benefit or lump sum distribution.
Coordinate with project team. This covers actuarial, finance, legal, fiduciaries (plan sponsor, investment team, independent), consultants, custodian.
Prepare plan data
Source pricing from group annuity providers
Complete the proscribed DOL 95-1 safest annuity review.
Conduct Annuity quote bid proecess
Finalize annuity quotes for fiduciary’s selection.
Coordinate with finance team and custodian to transfer funds and assets to insurer to execute the purchase of the group annuity.
Following the annuity purchase, confirm all beneficiary payments are complete and ready for distribution.
Ready to move forward?
Contact Cairnavigate today to discuss how pension risk transfer can improve your retirement portfolio and offerings.
Cairnavigate is a financial services consulting group that provides financial advisors, investment consultants and CFOs with pension and retirement plan investment solutions delivered through insurance. We specialize in pension risk transfer and stable value investment solutions that help companies create better outcomes for their plan participants.