According to MetLife, about 76% of defined benefit plans that are currently on a de-risking glide path intend to “completely divest” (read as terminate) plan liabilities. MetLife surveyed 102 plan sponsors at the end of 2018, of which about 40% had plan assets over $1 billion, and 48% had plan assets under $500 million. Detailed findings from the 2019 Poll include:
- About 10% of plan sponsors will engage in these pension risk transfer (PRT) activities within two years, while 43% will do so in more than five years.
- To achieve this divestment, 67% of plans will utilize either a buyout strategy alone or in combination with lump sum window activities. This number is 10% higher than the data in the 2018 survey.
- Most plan sponsors think they will tranche their participant populations, such as offering separate annuity programs to retirees and terminated-vested participants.
- Topping the list of drivers behind this interest to terminate plan liabilities: rising PBGC premiums. (It should be noted that PBGC premiums for single employer plans increased in 2019; fixed rate premiums increased from $74 to $80 per participant. Variable rate premiums increased from $38 to $43 per $1000 of unfunded vested liability).
- Many plan sponsors that participated in the survey also stated that they have taken steps to evaluate their plan in preparation for partial or full termination. This includes evaluating the financial impact and cost of PRT activities, cleaning-up participant data, and reviewing information about possible PRT service providers.