Pension Buyout Costs Edge Up, But De-Risking Boom Shows No Signs of Slowing

SEATTLE, WA – April 17, 2026 – The cost for companies to transfer their pension obligations to insurance carriers saw a slight uptick in March, but this minor increase has done little to dampen the enthusiasm in a pension risk transfer (PRT) market that continues to break records. According to a new analysis by global consulting firm Milliman, the competitive cost of a pension buyout rose marginally, yet the overarching trend of companies de-risking their balance sheets remains as strong as ever, fueled by high pension funding levels and persistent market volatility.

The latest Milliman Pension Buyout Index (MPBI) revealed that the estimated cost to transfer retiree pension risk through a competitive bidding process increased by 40 basis points during March, climbing from 100.5% to 100.9% of a plan’s accounting liabilities. This means a plan sponsor could expect to pay a premium of 0.9% over the stated value of its obligations to secure an insurer buyout. While any cost increase draws attention, experts note the figure remains highly favorable for sponsors looking to make a move.

A Market Defined by Momentum

The minor cost adjustment comes against the backdrop of a remarkably robust market. Data from LIMRA confirmed that 2025 was another blockbuster year for the PRT industry, with total volume soaring past $48 billion. This marks the fourth consecutive year that transfers have exceeded the $45 billion threshold, cementing the strategy as a mainstream corporate finance tool rather than a cyclical reaction to market events.

This sustained momentum is driven by a powerful confluence of factors. Many corporate defined benefit plans have seen their funding levels soar to decade-long highs, some even reaching or exceeding 100% funding. This healthy financial position provides the necessary capital for companies to execute a PRT transaction, effectively closing a chapter of long-term financial risk. By transferring pension liabilities—including investment risk and longevity risk, the uncertainty of how long retirees will live—to an insurer, companies can remove volatile obligations from their balance sheets and focus on their core business operations.

“Although annuity purchase costs increased this month, the competitive MPBI is around 100%, so plan sponsors are still seeing favorable results for their pension risk transfers,” said Jake Pringle, Milliman principal and co-author of the MPBI, in a statement accompanying the release. His comments underscore the sentiment that the current environment still presents a golden opportunity for de-risking.

The Power of Competition

While the headline cost figure ticked upward, Milliman’s data highlights a critical element for any plan sponsor: the immense value of a competitive bidding process. The index showed that the average annuity purchase cost across all insurers was 103.9% of liability. By running a competitive process, plan sponsors could achieve a price of 100.9%, representing an estimated savings of 3.0%. On a large pension plan, this percentage translates into tens or even hundreds of millions of dollars in savings.

This competition advantage is a key feature of the modern PRT landscape. Other industry analyses, such as Mercer's US Pension Buyout Index, have also shown that the cost of purchasing annuities can dip below the official accounting liability, reinforcing the idea that strategic execution is paramount. The savings are driven by a dynamic and increasingly crowded insurer market.

The growth in the PRT market has attracted a wave of new participants on the insurance side. Where once a handful of carriers dominated, there are now over 20 active insurers in the space, with more reportedly exploring entry. This expansion has dramatically increased market capacity and fostered intense competition, leading to better pricing, more innovative investment strategies by insurers, and greater flexibility in deal structures for plan sponsors. This is particularly true for mid-sized deals, which are seeing increased attention from a broader range of carriers.

Navigating the Path Forward

For corporate finance executives and pension fiduciaries, the current environment presents both an opportunity and a complex set of strategic choices. With plans well-funded and the insurer market hungry for deals, the question is not if to de-risk, but how and when. The primary decision often boils down to two paths: “hibernation” or “termination.”

Hibernation involves maintaining the pension plan but shifting its assets to a low-risk portfolio, such as liability-driven investing (LDI), to match its obligations and minimize volatility. This approach keeps the plan on the company's books but aims to make it as stable as possible. Plan termination, on the other hand, is the full divestiture of liabilities through a complete PRT transaction, permanently removing the risk.

The decision is influenced by a complex web of factors, including a company's tolerance for risk, its long-term financial strategy, and the evolving regulatory landscape. Federal agencies continue to shape the rules of the road. The Department of Labor, for instance, recently affirmed its long-standing guidance (Interpretive Bulletin 95-1) on the fiduciary duties involved in selecting an annuity provider, emphasizing a prudent process without imposing new rules. Meanwhile, the ongoing implementation of the SECURE 2.0 Act introduces other changes to the retirement ecosystem that plan sponsors must navigate.

Given the favorable market conditions, preparation has become the watchword for plan sponsors. Experts advise that companies considering a PRT transaction should focus on preparatory steps like data cleansing—ensuring participant records are accurate and complete—and establishing a clear governance framework. Being “transaction ready” allows a sponsor to move quickly and decisively when the perfect combination of market pricing and internal readiness aligns, ensuring they can capture the best possible outcome for the plan and its participants.

The slight rise in March's costs serves as a subtle reminder that market windows do not stay open forever, but for now, the pension de-risking boom continues to roll on.