September’s PRT costs increased from 100.8% to 101.7%: Milliman

Global consulting and actuarial firm Milliman has reported that the estimated retiree pension risk transfer (PRT) cost for September reached 101.7% of a plan’s accounting liabilities (accumulated benefit obligation, or ABO).

In its latest Milliman Pension Buyout Index (MPBI), the firm outlines that the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process increased from 100.8% of a plan’s ABO to 101.7% during September.

Meanwhile, the average annuity purchase cost across all insurers in the firm’s index also rose, from 104.1% to 104.4%.

According to Milliman, the competitive bidding process is estimated to save plan sponsors about 2.7% on PRT costs as of September 30.

The firm notes that as the PRT market continues to grow, it is becoming “increasingly important” to monitor the annuity market for plan sponsors that are considering transferring retiree pension obligations to an insurer.

Jake Pringle, a Milliman principal and co-author of the MPBI, stated: “In September, we saw IBM announce a $6 billion PRT transaction, a good indication that the market will remain active as we enter the 4th quarter of another busy PRT year.”

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