Chemtura Corporation has become the latest company to follow the trend — transferring its pension liabilities to a third party.
Chemtura reached an agreement with Voya Retirement Insurance and Annuity Company to provide pension payments to approximately 5,000 retirees and beneficiaries currently covered under the Chemtura Corporation Retirement Plan. The transaction, known as a pension risk transfer arrangement, will shift the responsibility for Chemtura’s pension obligations over to Voya. In exchange for Voya taking on its financial obligation, Chemtura will purchase a group annuity contract representing approximately $350 million in premiums to be paid to Voya.
In the wake of the passage of the Pension Protection Act of 2006 and the financial crisis of 2008, plan sponsors have increasingly looked for ways to derisk their pension commitments — and increasingly have turned to the marketplace to find companies willing to assume pension risks. In fact, last June consulting firm Mercer launched the Mercer Pension Risk Exchange, aimed at helping a growing wave of plan sponsors execute group annuity buyouts more quickly and to comparison shop for price.
As the trend grows, the Pension Benefit Guaranty Corporation (PBGC) is looking at the patterns in risk transfer activity, since companies that derisk will no longer be paying premiums to PBGC and that will also affect PBGC’s long-term financial condition.
The biggest players in the market include Prudential, whose risk transfer business is in the top slot and oversees $60 billion of U.S. pension liabilities, and MetLife, which is in second place with $38 billion in pension liabilities. Voya aims to rise in the standings though, since, according to the company, it “views the pension risk transfer market as having natural synergies with its various businesses.”
On May 1, Voya will start making the pension payments to retirees and beneficiaries of Chemtura’s plan. Individuals’ monthly benefits will remain the same, and Voya said there will be no other changes except that the payments will come from Voya instead of Chemtura.
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