Overview
"Pension de-risking” – a set of techniques for transferring a pension plan’s financial risks from employers to insurance companies and participants – has been a notable, and not entirely uncontroversial, trend since Ford Motor Company employed it to settle $3.4 billion of pension obligations during 2012 and 2013. The impetus is apprehension that superficially well-funded defined benefit plans may become onerous burdens, primarily owing to rapid and unpredictable increases in pensioners’ life spans. Other concerns are investment volatility (not a new phenomenon, of course) and steadily rising Pensions Benefit Guaranty Corporation (PBGC) insurance premiums. De-risking alleviates these worries by transforming uncertain future benefit streams into single, fixed payments.
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