De-Risking Defined-Benefit Plans

Prudential’s Portfolio Protected Buy-in relieves sponsor of market, mortality risk

As U.S. companies look more closely at the risks involved in offering defined-benefit pension plans, Prudential Financial says it has pioneered a transaction, called Portfolio Protected Buy-in, that relieves plan sponsors of market risk and mortality risk.

In the first transaction, Hickory Springs Manufacturing Co. transferred $75 million of pension risk to Prudential, which will fund all future pension payments for its plan participants who were retired as of May 1. The assets sit in a separate account at Prudential, which guarantees that it will make all future pension payments for those retirees, no matter what return it realizes on the separate account.

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