The benefits of pension risk transfer

By Keith McDonagh
Keith McDonagh is Head of the Institutional Solutions businesses for MassMutual.
Posted on Aug 14, 2017

Very few companies would list “managing a pension plan” among their core business competencies. That is because pension plans are a benefit developed for the employees you’ve hired to make your company successful; the pension plan was not your company’s core reason to exist. To run a successful business, companies seek to have a well-managed pension plan and related liabilities so that the company can focus on what it does best.

Fortunately, managing pension liabilities is a core competency of financial services providers. Should a company choose to maintain its pension plan, defined benefit services help employers manage the assets, costs and administration.

However, with market volatility and low interest rates, combined with increasing Pension Benefit Guarantee Corporation (PBGC) premiums, companies face challenges in managing the cost and volatility associated with their pension plans. These concerns take time and attention away from their core business. Increasingly, entities are choosing to remove that risk by transferring the payment obligations to a financially strong insurer.

A pension risk transfer through a pension buyout solution helps companies focus on their core business, with the confidence that payments to the individuals in those plans continue for the full benefit period. A well-designed pension buyout strategy has several important benefits:

  • Reduce risk by transferring the uncertainties associated with plan assets and liabilities
  • Eliminate accounting and funding volatility driven by the stricter regulatory environment
  • Lower expenses by eliminating PBGC premiums and administrative, actuarial and investment management expenses
  • Enable a greater focus on your core business, increasing overall value for your organization

The most effective pension buyout solution is customized to best fit that company’s business needs. Pension buyout solutions include:

  • A single-premium annuity contract with an irrevocable commitment to provide the benefits purchased, which can be funded through cash or a transfer-of-assets in kind
  • Benefit payments guaranteed to the individuals (or their beneficiaries) through annuity certificates from a highly rated insurer
  • High-quality customer-focused administrative services, information and communications
  • Availability of general account and separate account solutions

Once you choose to pursue this path, the selection of an insurer for your buyout annuity is an important decision that requires the consideration of a number of factors to find the right provider. The factors that matter most when looking for a pension buyout provider are financial strength, long-term value, pension experience, and service excellence.

If you’d like to learn more about MassMutual’s pension risk-transfer capabilities, contact us or talk to your pension advisor. No one understands long-term obligations better than a company that has over 70 years in managing pension liabilities and defines the horizon in terms of decades. As a leading provider in the pension risk transfer market, MassMutual can help you get there.


Keith McDonagh is Head of the Institutional Solutions businesses for Massachusetts Mutual Life Insurance Co. (MassMutual), which includes Institutional Insurance, Institutional Longevity, Defined Benefit, Institutional Investments, Stable Value, Medium Term Notes and Guaranteed Interest Contracts.

More from MassMutual...

Institutional Solutions

Institutional Longevity

The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel.