Settling Pension Liabilities: Ford Motor Corp & Retiree Annuity Carve Outs
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Interest Rate Update May 2012— Volume 5, Issue 5 www.dietrichassociates.com DietrichAnnuity Guaranteed Income for Life F ROM THE P RESIDENT ’ S D ESK Settling Pension Liabilities: Ford Motor Corp & Retiree “Carve Out” Annuity Purchases Recently Ford Motor Company announced it will offer 90,000 salaried retirees and terminated vested participants a lump sum in lieu of all future benefits payable under the plan. While lump sum settlement strategies have been widely discussed in the years following PPA, this decision marks the first corporate action by a blue-chip company with large legacy pension obligations, and perhaps foreshadows similar action by other large corporations in the months and years ahead. Settling pension obligations by offering voluntary lump sums or by purchasing annuities for legacy liabilities is a powerful risk management strategy that can serve to reduce the size and complexity of a pension program. While the decision making calculus for each company will differ depending on organizational objectives and financial flexibility, we expect that sponsor interest in offering lump sums and procurement of group annuity contracts will remain strong in the years ahead. Dietrich recommends that organizations interested in considering voluntary lump sum offers also consider the merits of an annuity purchase covering a plan’s retired lives (aka “retiree carve out”). A retiree annuity purchase can effectively eliminate the pension portfolio’s need to generate income to provide ongoing benefit payments, while allowing the remaining un-annuitized plan assets to focus exclusively on generating returns needed to keep projected costs low and close funding gaps. Feel free to contact us for more information on how a cost effective retiree carve out strategy can be tailored to meet specific client objectives. To view the complete May Pension Risk Transfer Index, click here. Regards, Kurt Dietrich Instantly receive online Immediate Annuity quotes from DOL 95-1 Safest Available insurers. DietrichAnnuity is suitable for Qualified and Non-Qualified, Employer Sponsored benefits such as: • Defined Benefit Plans • Defined Contribution Plans • SERP/NQ Executive Bonus Arrangements For more information or to request access please visit: DietrichAnnuity May 2012 Interest Rate Update Dietrich & Associates, Inc. Class of Rates All Retiree 2.75%-3.00% Term-Vested 3.00%-3.25% Active 3.25%-3.50% Net Interest Rates Week Of May 21, 2012 May 2012 PRT Index Level 89.59 Sept 2010: PRT Index =82.7 Jan 2009: PRT Index =121.4 Plan/Monitor Opportunistic Settlement Attractive Annuitization Attractiveness
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Brief discussion surrounding the strategic settlement of pension liabilities, done outside the context of a pension plan termination.
Transcript of Settling Pension Liabilities: Ford Motor Corp & Retiree Annuity Carve Outs
Interest Rate Update May 2012— Volume 5, Issue 5 www.dietrichassociates.com
DietrichAnnuity Guaranteed Income for Life
FROM THE PRESIDENT’S DESK
Settling Pension Liabilities: Ford Motor Corp & Retiree “Carve Out” Annuity Purchases
Recently Ford Motor Company announced it will offer 90,000 salaried retirees and terminated vested participants a lump sum in lieu of all future benefits payable under the plan. While lump sum settlement strategies have been widely discussed in the years following PPA, this decision marks the first corporate action by a blue-chip company with large legacy pension obligations, and perhaps foreshadows similar action by other large corporations in the months and years ahead. Settling pension obligations by offering voluntary lump sums or by purchasing annuities for legacy liabilities is a powerful risk management strategy that can serve to reduce the size and complexity of a pension program. While the decision making calculus for each company will differ depending on organizational objectives and financial flexibility, we expect that sponsor interest in offering lump sums and procurement of group annuity contracts will remain strong in the years ahead. Dietrich recommends that organizations interested in considering voluntary lump sum offers also consider the merits of an annuity purchase covering a plan’s retired lives (aka “retiree carve out”). A retiree annuity purchase can effectively eliminate the pension portfolio’s need to generate income to provide ongoing benefit payments, while allowing the remaining un-annuitized plan assets to focus exclusively on generating returns needed to keep projected costs low and close funding gaps. Feel free to contact us for more information on how a cost effective retiree carve out strategy can be tailored to meet specific client objectives. To view the complete May Pension Risk Transfer Index, click here.
Regards, Kurt Dietrich
Instantly receive online Immediate Annuity quotes from DOL 95-1 Safest Available insurers.
DietrichAnnuity is suitable for Qualified and Non-Qualified, Employer Sponsored benefits such as:
• Defined Benefit Plans
• Defined Contribution Plans
• SERP/NQ Executive Bonus Arrangements
For more information or to request access please visit:
DietrichAnnuity
May 2012
Interest Rate Update
Dietrich & Associates, Inc.
Class of Rates
All Retiree 2.75%-3.00%
Term-Vested 3.00%-3.25%
Active 3.25%-3.50%
Net Interest Rates Week Of May 21, 2012
May 2012 PRT Index Level
89.59
Sept 2010: PRT Index =82.7
Jan 2009: PRT Index =121.4
Plan/Monitor Opportunistic Settlement Attractive
Annuitization Attractiveness
