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Cost of pension buyout falling

The costs for a company to keep its pension liabilities or shift them to annuities purchased from an insurance company were nearly identical in October.

By Dan Berman | Updated on December 03, 2013

The costs for a company to hold onto its pension liabilities vs. shifting them to annuities were nearly identical in October, suggesting the time is right for employers to unload their defined benefit pension plans, according to the latest Mercer Pension Buyout Index.

The index found that the cost of buying out a pension plan by purchasing annuities had fallen to 108.3 percent of the value of liabilities. The cost of keeping the plan was 108.2 percent of the value. Rising interest rates throughout the year have reduced future unfunded liabilities while rising stock prices have raised pension fund assets, causing the costs to converge.

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