Milliman's Pension Buyout Index: Key Insights on Retiree Risk Transfer Costs

Milliman Unveils Updated Pension Buyout Index Highlighting Retiree Risk Transfer Costs

Milliman, Inc., a recognized leader in consulting and actuarial services, has released the latest Milliman Pension Buyout Index (MPBI), highlighting pivotal shifts in pension liability transfer costs. The December data reveals a slight uptick of 20 basis points in expenses for plan sponsors electing to transfer retiree pension risk, with costs rising from 100.1% to 100.3% of a plan's accumulated benefit obligation (ABO). This development emphasizes the growing financial considerations for insurers and plan sponsors.

Notably, the average cost across participating insurers showed a minimal increase from 103.3% to 103.4%, drawing attention to industry trends in competitive bidding. This strategic process is poised to enable plan sponsors to achieve approximately 3.1% savings in pension risk transfer (PRT) costs by late 2025. The updated index serves as a vital tool for risk management professionals navigating complex pension obligations.

Regulatory Insights on Pension Risk Transfer

Jake Pringle, a Milliman principal and co-author of the MPBI, provides valuable regulatory insights following recent developments: "Earlier this month, the U.S. Department of Labor filed an amicus brief to clarify the legal landscape for pension risk transfers. The DOL affirms fiduciaries are protected when demonstrating prudence and loyalty in the pension risk transfer process." This regulatory clarity, coupled with stable retiree buyout costs, signals promising outcomes for plan sponsors aiming to mitigate pension liabilities effectively as 2026 approaches.

The MPBI employs a detailed comparison of the FTSE Above Median AA Curve against annuity purchase interest rates from nine insurers, offering critical insights into competitive and average annuity de-risking strategy costs. Plan sponsors can access the complete Milliman Pension Buyout Index for comprehensive analysis, with individual buyouts potentially varying due to plan size, complexity, and market competition.

Insurance industry professionals interested in data-driven perspectives on pension risk management strategies and market trends can subscribe to Milliman's ongoing updates by contacting pensionbuyout@milliman.com. The publication offers objective insights, free from consumer marketing tactics, tailored for specialists seeking regulatory compliance guidance within the industry.