According to a survey conducted by benefits consulting firm Mercer and CFO Magazine, sponsors of defined benefit pension plans are increasingly interested in purchasing annuities to transfer  plan liabilities to a third party. Almost half of the executives who responded to the survey indicated that they were at least somewhat interested in the strategy—including 15% who said their companies were very likely to take this step in the next two years.

The survey showed that low interest rates and high costs are viewed as significant obstacles to transferring plan liability to insurance companies. But what about the legal implications? In 2012, Ford and General Motors went through with de-risking strategies involving lump sum settlements and third party annuities after securing private letter rulings from the IRS. But many employers are concerned that transferring pension liability will trigger claims of breach of fiduciary duty. The recent dismissal of such a lawsuit against Verizon may help to ease those fears. There is also a possibility that Congress will intervene as more large companies take steps to shift the risk of pension liabilities to insurance companies.  

 --Vanessa Walts (Compensation Planning)