Pension Risk Transfer Costs Edge Higher Despite Regulatory Clarity
Event summary
- Milliman's Pension Buyout Index (MPBI) shows competitive PRT costs increased 20 basis points in December 2025, reaching 100.3% of accounting liabilities (ABO).
- Average annuity purchase costs also rose slightly, from 103.3% to 103.4%.
- Competitive bidding is currently saving plan sponsors an estimated 3.1% on PRT costs.
- The U.S. Department of Labor recently issued an amicus brief clarifying fiduciary protections in pension risk transfer processes.
The big picture
The slight increase in PRT costs, despite regulatory clarity, highlights the ongoing tension between plan sponsor demand and insurer capacity. While the DOL's guidance provides a degree of comfort for fiduciaries, the underlying economics of pension risk transfer remain sensitive to market conditions and insurer pricing. This trend suggests that PRT will likely remain a viable, but potentially costly, option for plan sponsors seeking to offload retiree liabilities.
What we're watching
- Regulatory Response
- The DOL's clarified guidance could accelerate PRT adoption, but its practical impact will depend on how fiduciaries interpret and apply it.
- Cost Pressures
- Continued upward pressure on annuity purchase costs may limit the appeal of PRT for smaller or less well-funded plans.
- Market Dynamics
- The pace at which insurers expand capacity for PRT transactions will influence the availability and pricing of these deals.
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