Pension Plan De-Risking:
How employers can transfer the risk of defined benefit pensions
The phrase “pension de-risking” was not part of the pension plan lexicon until Ford Motor Co. dropped a pension benefit bombshell when it announced that it would offer about 90,000 salaried retirees and former employees the option to take their current or future monthly annuity as a lump-sum cash payment. Offering pension plan participants a lump-sum option is not uncommon, but such offers typically are made to employees at the time they terminate employment, not when they have already retired and are receiving their monthly annuities. The move allowed Ford to reduce its exposure to unpredictable pension plan costs and allowed it to concentrate on its core auto business. Ford's move was soon followed by other large companies and the trend is expected to continue. This white paper explains how pension de-risking works, outlines the advantages of the strategy and reviews the outlook for the pension de-risking approach. View a sample.