Corporate Pension Risk Transfers

65 Pages Posted: 21 Jun 2022 Last revised: 21 Dec 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 2022, U.S. corporate sponsors of defined benefit (DB) pension plans used pension risk transfers (PRTs) to transfer more than 150 billion pension obligations to insurance companies, thereby reducing the pool of corporate DB plan participants by 10\%. We assemble a new PRT database and study the drivers and consequences of PRTs. Consistent with a simple model, the propensity to conduct a PRT is higher for firms with higher flow-through costs from their pension plans and higher burdens for paying insurance premiums to the Pension Benefit Guarantee Corporation (PBGC). Safer plan sponsors with less default risk and less volatility in their pension assets are more likely to conduct PRTs thereby increasing PBGC's pool risk.

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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