Pension Risk Transfer

What are the Risks?

Defined Benefit pension plans are retirement plans that promise to pay a specific, defined payment to employees when they retire. Companies are required to estimate future liabilities and maintain certain levels of funding based on a number of assumptions, including: 
  • Employee’s Years of Service
  • Employees Average Salary
  • Life expectancy
  • Interest Rates (Both pre and post retirement)
Defined Benefit plans represent a significant financial obligation with significant risks for companies and plan sponsors. Many factors affect the ability to accurately plan for these future obligations:
  • Increased life expectancy resulting in higher costs due to longer pension payouts
  • Interest rate volatility posing risks to funding status
  • Compliance risk 
    • Regulatory and legislative changes are expected to continually reduce plan sponsor options and increase the cost of administration
  • Fiduciary risk – plan sponsor is liable for the plan and the future delivery of plan benefits
  • Increasing government levies – The Pension Benefit Guaranty Corporation (PBGC) levies a charge on plans that are underfunded to provide protection against plan failure
    • The PBGC is the government entity charged with insuring that participants receive some or all of their pledged benefit
Employers must constantly monitor all these factors affecting the plan liability to ensure the “defined” benefit is available at the employee’s retirement. This type of liability can be a significant entry on the company’s balance sheets, and thus, many employers are wanting and finding it necessary to better manage this risk through a variety of de-risking strategies and outsourcing of administrative functions.

De-Risking Options


  • Eliminate HR duties related to pension plan and reduce distractions
  • Reduce opportunity for compliance risk
  • Provide improved service model to participants with access to pension professionals
  • Reduce errors related to benefits eligibility and amounts

Lump Sums

  • Eliminates future administrative costs related to providing notices and PBGC premiums
  • Single payments to certain participants to settle benefit obligations
  • Eliminates investment risks and future costs of mortality improvement
  • Reduces plan size and a degree of volatility (may trigger settlement charges)


  • Group annuity purchase guarantees retiree payments
  • Transfers mortality and investment risks
  • Annuity Cost > GAAP Funding Liability (reduces funded status)
  • Buy out - Retirees continue to receive pension from Trust and no settlement charges
  • Buy in - Retirees receive individual annuity contracts and settlement charges may occur Liability Driven Investing (LDI)
  • Immunizes plan obligations with dedicated investment portfolio
  • Match investments to specific plan liabilities
  • Reduces investment and interest rate risk

MSW Pension De-Risking Solutions

As more employers struggle with the current landscape, more businesses – of all sizes – are weighing their options regarding the future of their plans.

MSW delivers powerful employer solutions for pension risk transfers that will improve an employer’s balance sheet, reduce and eliminate asset risk, decrease volatility and help companies take control of their future. Six members of the BB&T family power our integrated solution, working together to develop a program crafted precisely to an employer’s specific goals and objectives. While others deliver services by collaborating with various entities, resulting in added levels of friction, time lost, conflicting goals, and fractured culture and vision, we offer integrated pension risk solutions and the best client experience – all from one company. For more information related to our Pension Risk Transfer practice, please click on the links below.
Pension Risk Transfer Overview
Pension Risk Transfer Solutions