Pension risk transfer, explained
A plain-language guide for CFOs, HR leaders, and board members who don’t work with defined benefit plans every day.
What is a group annuity contract?
A single contract bought from an insurance company that pays pension benefits to a group of retirees or employees, taking that obligation off the employer’s books.
Buy-out vs. buy-in
In a buy-out, the insurer takes over the obligation and pays participants directly. In a buy-in, the plan holds the annuity as an asset and keeps the obligation, for now.
Lift-out
Transferring a specific group, often current retirees, while the rest of the plan continues. Useful when the full plan isn’t ready to terminate.
Frequently asked questions
When does a pension risk transfer make sense?
Common triggers: improved funding levels, rising PBGC premiums, administrative burden, and wanting predictable costs. A feasibility review compares the cost to settle today with the cost of keeping the plan.
How long does a plan termination take?
A standard termination follows PBGC timelines and often takes about a year or more from start to finish. See the PBGC standard termination timeline (PDF, from the current site). Placeholder DIETRICH to confirm typical timeline wording.
What does “safest available annuity” mean?
DOL Interpretive Bulletin 95-1 requires fiduciaries to choose the safest available annuity provider unless doing otherwise is in participants’ interest, and to use an independent expert if they lack the expertise in-house.
What data do insurers need to price my plan?
The plan document and amendments, the most recent actuarial valuation, and a clean participant census. See the document checklist.
Does DIETRICH work with our existing actuary and attorney?
Yes. DIETRICH works with the plan’s actuaries, investment advisors, attorneys, and third-party administrators.
How is DIETRICH paid?
Placeholder A clear, plain-language compensation disclosure belongs here.
Glossary
| Term | Plain meaning |
|---|---|
| Plan sponsor | The employer that offers and is responsible for the pension plan. |
| Term vested | Former employees who earned a pension but haven’t started receiving it. |
| PBGC | The federal agency that insures private pensions; plans pay it yearly premiums per participant. |
| Unfunded vested benefits (UVB) | How far plan assets fall short of vested benefits; drives the PBGC variable-rate premium. |
| Annuity certificate | The document each participant receives from the insurer describing their benefit. |
Start with a 30-minute review call
Step 1: a quick call to review your company’s pension risk. DIETRICH researches options, then a 60-minute results call walks through solutions and next steps.