Pension risk transfer activity has continued to grow this year, and these transactions could get an additional boost next year if the funded status of companies' defined-benefit pension plans improves as a result of rising interest rates or strong equity markets.
Companies concerned about the risks entailed in their pension plans can transfer some of their obligations either by purchasing an annuity from an insurer to cover future payments to a group of retirees or by offering lump-sum buyouts to participants.
The effort to reduce plans' risks is occurring at a time when many corporate pension plans are constrained by funding shortfalls. Benefits consultancy Mercer put the aggregate funded status of defined-benefit pension plans sponsored by S&P 1500 companies at 84 percent at the end of November, up slightly from 82 percent at the end of 2016.
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