Bloomberg BNA's Pension & Benefits Blog is a special resource offered by Bloomberg BNA to provide commentary and insight on news and trends reported in our publications: Pension & Benefits Daily, Pension & Benefits Reporter, and the Benefits Practice Resource Center. The authors of the blog are members of our Pension & Benefits Publications Advisory Board.
The ideas presented here are those of individuals, and Bloomberg BNA bears no responsibility for the appropriateness or accuracy of the communications between group members. We reserve the right not to post comments that are abusive or otherwise objectionable.
Communications regarding the Pension & Benefits Blog may be directed to Dana Domone via e-mail to firstname.lastname@example.org.
Friday, November 2, 2012
by Florence Olsen
After Ford Motor Co. and General Motors Co. announced earlier this
year that they would offer some retired and former employees a one-time
opportunity to take lump-sum distributions, pension rights advocates
were surprised at how quickly other large employers appeared to follow
“It's an alarming and unexpected trend,” Karen Friedman, executive
vice president and policy director at the Pension Rights Center in
Washington, told BNA in an Oct. 24 interview.
The Pension Rights Center has been tracking lump-sum offers
associated with what benefit consultants refer to as pension
The current wave of de-risking transactions generally involves
offers of lump-sum distributions or transfers of pension liabilities to
an insurance company—or both.
Since the Ford and GM announcements in April and June,
respectively, Verizon Communications Inc. and other corporate employers
have made de-risking decisions. Verizon announced it would transfer a
substantial portion of its pension liabilities to Prudential Insurance
Co. of America by purchasing a group annuity contract from the insurer.
Verizon did not offer a lump-sum option.
Friedman said the current wave of de-risking reminds her of the
not-too-distant past when employers were terminating pension plans so
they could use the excess assets for other business purposes or
converting their traditional defined benefit plans into less-expensive
cash balance plans.
De-risking initiatives reduce an employer's pension liabilities,
administrative costs, and the effects of financial volatility that
pension benefits create on the employer's operating budget. However,
de-risking is not without its own risk and cost to employers, according
to benefit consultants who advise employers on how to structure
Many de-risking initiatives target the benefits of former
employees—namely, retirees who already are receiving monthly pension
benefits and deferred vested participants who have earned pension
benefits but are no longer working for the employer that is obligated to
pay the benefits.
to post a comment.
IRS to Focus on Safe Harbor 401(k) Plans, Other Concerns Highlighted in Questionnaire
IRS Makes Employers’ Internal Controls a Priority in Employee Plan Audits
Implications of ASU 2011-4 for sponsors of ESOPs
FASB Issues Exposure Draft on ESOP Disclosures; Comment Period Open
Follow-Up Q&A From EBN Webinar