Corporate Pension Risk Transfers

72 Pages Posted: 21 Jun 2022

See all articles by Sven Klingler

Sven Klingler

BI Norwegian Business School

Suresh M. Sundaresan

Columbia University - Columbia Business School, Finance

Michael A Moran

Goldman Sachs Group, Inc. - Goldman Sachs Asset Management

Date Written: June 15, 2022

Abstract

Between 2012 and 2020, U.S. corporate sponsors of defined benefit (DB) pension plans transferred around $100 billion pension obligations for more than one million plan participants to insurance companies using pension risk transfers (PRTs). We model PRT decisions as an option exercise problem and assemble a new data set of PRTs. Consistent with our model, the propensity to conduct a PRT is higher for firms with higher macroeconomic flow-through costs, lower stock market investments, more inactive employees, and lower default risk. We highlight potential implications of PRTs for the remaining sponsor pool and compare PRTs to other de-risking strategies.

Keywords: Pension funds, defined benefits, de-risking strategies, pension protection act, life insurance

JEL Classification: G11, G22, G23, J32

Suggested Citation

Klingler, Sven and Sundaresan, Suresh M. and Moran, Michael A, Corporate Pension Risk Transfers (June 15, 2022). Available at SSRN: https://ssrn.com/abstract=4137429 or http://dx.doi.org/10.2139/ssrn.4137429

Sven Klingler (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Suresh M. Sundaresan

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States
212-854-4423 (Phone)
212-316-9180 (Fax)

HOME PAGE: http://www0.gsb.columbia.edu/faculty/ssundaresan/

Michael A Moran

Goldman Sachs Group, Inc. - Goldman Sachs Asset Management ( email )

200 West Street
New York, NY 10282
United States

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