Protecting American Businesses and Retirees: The Importance of Pension Risk Transfers with Life insurance Companies – By Susan K. Neely

The American economy is a complex and dynamic system, driven by the interplay of free market forces and thoughtful public policy. In order to sustain America’s impressive $26.9 trillion gross domestic product and low 3.9% unemployment rate, it is crucial for U.S. companies to have the support of effective public policies that enable them to thrive financially and create jobs for American workers.

One such policy that has been instrumental in helping American businesses reduce risk and ensure retirees receive their promised pensions is the use of pension risk transfers to group annuity contracts with Life insurance companies. This proven method has allowed many companies to offload their pension obligations to firms with expertise in managing long-term liabilities, such as Life insurance companies.

In today’s hypercompetitive global economy, companies are constantly seeking ways to modernize their operations and eliminate unnecessary risks and costs. Many U.S. corporations have significant future pension obligations for retirees on their books, which can pose a challenge due to increasing life expectancies and the potential for liabilities to stretch on for decades.

By transferring their pension plan benefit obligations to Life insurance companies, companies can effectively manage these long-term risks and ensure that retirees receive their promised pensions. Life insurance companies have a unique long-range perspective and expertise in managing long-term liabilities, making them well-suited to handle pension transfers from corporations.

Despite the success of the current rules governing pension risk transfers, the U.S. Department of Labor is considering potential policy changes that could impact the ability of companies to use this strategy. The current rules, which have been in place for nearly 30 years, have proven to be effective in ensuring the stability and soundness of life insurers and protecting the interests of retirees.

Life insurance companies have a long history of successfully managing pension transfers and have weathered economic challenges such as world wars, the Great Depression, and global pandemics. Their solvency is closely monitored and regulated by state authorities to ensure that they can fulfill their long-term promises to customers.

The track record of life insurers in managing pension transfers speaks for itself. Since the implementation of the current rules in 1995, no Life insurance company has failed to make a group annuity payment to a plan participant following a pension risk transfer, while over 2,600 private employer traditional pension plans have failed in the same period.

It is clear that pension risk transfers to Life insurance companies have been a successful strategy for U.S. companies to manage their long-term pension obligations and focus on their core business activities. The DOL should recognize the effectiveness of this approach and continue to support policies that enable companies to safeguard the pensions of their retirees.

Susan K. Neely, the president and CEO of the American Council of Life Insurers, emphasizes the importance of maintaining a regulatory environment that allows U.S. companies to benefit from the expertise and stability of life insurers in managing pension risks. As the U.S. economy continues to evolve, it is essential to support policies that enable businesses to thrive financially and create opportunities for American workers.