The first concern for any plan sponsor or fiduciary of a defined benefit plan, no matter the size, is providing the protected benefits and acting in the best interest of all the participants in the plan.
Whether a sponsor or fiduciary is transferring a portion of the plan liability to an insurance group through a pension risk transfer annuity purchase, or "lift out" transaction, or all of the plan liability is going to be transferred, through a "termination" transaction, the sponsor or fiduciary needs to complete a due diligence review of the insurance companies involved, in accordance with the U.S. Department of Labor's 95-1 "Safest Available Annuity" guidance.
For the purpose of this discussion, we'll assume this due diligence review is taking place for a PRT annuity purchase.
Now for the question at hand: "Can the small or medium size defined benefit plans garner the same annuity pricing as the jumbo plans during a PRT annuity purchase?"
The answer is: Yes.
If the smaller sponsor or fiduciary follows the same process as the larger plans, then the probability of attaining the same results dramatically increases..
Let's review some key steps a larger plan sponsor will take.
Hiring a PRT Specialist
All large plan sponsors hire a pension risk transfer consultant when contemplating an annuity purchase to transfer some or all of the defined benefit plan liability.
This specialist will identify the processes and timing specific for the annuity purchase..
A couple of key factors to contemplate are when to hire the PRT consultant and what to look for when hiring the PRT consultant.
The first factor is easy to answer: the sooner the better.
Hiring an independent pension risk transfer consultant early in the process provides more options and organization. More often than not, it will produce a better result.
The second factor — "What to look for when hiring a PRT consultant?" — is a little more difficult to address.
There are many advisors anxious to help plan sponsors with this task, but are they the right ones?
Hiring a PRT consultant is a fiduciary decision, and the plan sponsor or fiduciary should follow some prudent steps when doing that.
Data, Data, Data
Data is everything.
Mark Unhoch
