Last week, IBM announced that it entered into a $6 billion pension risk transfer (PRT) agreement with Prudential Insurance Company. As the retirement industry evolves from pension plans to 401(k) plans, PRTs allow firms to offload the burdensome administration of allocating pension plans.
PRTs have helped firms bridge the transition, however, there have been a rash of class action lawsuits filed by former employees and retirees that claim their employers chose a risky insurer. In 2023, there were a record 773 PRTs, which is expected to grow. Increasingly, private equity firms are seeking to purchase stakes in annuity assets to gain access to a permanent capital stream.
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