The Mercer US Pension Buyout Index for March showed retiree buyout costs accounted for 110 percent of the accounting liability.

According to Mercer, the economic cost includes an allowance for future retention costs (administrative, PBGC premiums and asset-related costs) as well as a reserve for future improvements in mortality. These additional costs and reserves are not included in the accounting liabilities published by plan sponsors, but do represent future costs that should be reflected in any risk transfer comparisons and evaluations.

The Index is compiled using data from a number of leading U.S. life insurance companies, including American General, MetLife, Principal, Pacific Life, Prudential and United of Omaha. It allows plan sponsors to see at a glance the relative cost of a buyout by an insurer of retiree liabilities of a defined benefit plan, and how that cost changes over time. It also shows the approximate cost of retaining the retiree liabilities on a plan sponsors' balance sheet.

Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.

  • Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.