Jeff Stevenson is CEO of October Three, an actuarial and consulting firm specializing in modern retirement plan design and administration.
Pension risk transfer (PRT) is used to reduce a plan sponsor’s liabilities within their defined benefit (DB) plans. PRTs occur when plan sponsors purchase annuities from an insurance company for some or all of their plan participants. This is typically done to mitigate risk by aligning the plan’s funding liability with the plan assets, and to reduce the amount of Pension Benefit Guaranty Corporation (PBGC) premiums plan sponsors are required to pay.
There are a few main types of PRT transactions:
• Lift-outs: Liabilities for a subset of plan participants (excluding active participants) are transferred to an insurance company by purchasing annuities.
• Plan Termination: Annuities are purchased for all remaining participants, and the plan is ended permanently.
• Buy-ins: These are policies bought by plan sponsors covering liabilities of specified plan assets. The plan sponsor maintains responsibility for administration and participant payments. The liabilities remain part of the plan as well as the value of the annuity.
What To Know About PRT In 2025
My organization recently conducted a survey of insurance companies for our 2025 PRT Trends Report. Insurance carriers provided insight into their business in the first half of the year and what they expect going into the first half of 2026. The survey revealed some interesting changes taking place in the market.
1. Declining Activity
PRT activity in 2025 is expected to decline from 2024. The decline is largely driven by a decrease in jumbo transactions ($1 billion or larger). Much of this is attributable to overall economic uncertainty. However, the recent increase in litigation around PRT transactions is also a factor in businesses delaying decisions on larger transactions.
These findings are also supported by LIMRA’s Q2 data.
2. Transaction Type
Thus far in 2025, PRT transactions have trended toward more plan terminations than participant lift-outs. Many factors including interest rates, strong stock market performance and high pension funding levels are currently providing incentives for companies to proceed with terminations, particularly those with frozen pension plans.
In their 2025 Pension Risk Transfer Poll, MetLife claims “the majority of companies with de-risking objectives still intend to fully divest their defined benefit plans.”
Buy-ins are also becoming more common. According to our survey, many plan sponsors are pursuing buy-ins as a strategy to lock in favorable annuity purchase interest rates as they move toward terminating their plans since buy-ins can be transacted much more quickly than plan terminations. Although the market has seen a greater number of buy-ins this year, they still only make up a small fraction of overall PRT market activity.
3. Increasing Competition
The decrease in PRT activity is forcing insurance carriers to become more competitive. Many reported that they have changed their underwriting guidelines to take on business they typically wouldn’t. For example, the lack of jumbo transactions in 2025 has caused some carriers to move down-market, while others are taking on working participants whose payments are deferred instead of just taking on retirees.
The consensus is that more carriers are likely to enter the PRT market in the coming years, and those already in the market are devoting more resources to their PRT business.
What This Means For Businesses With DB Plans
Today, the world of DB plans isn’t all risk. Over the past few years, there have been many reports of companies like IBM re-opening their DB plans. Why are some businesses going all in on DB plans and others looking to de-risk? Most of those grappling with risk in their plans have legacy pension plans designed for a decades-old economy. Many businesses, like Delta Airlines, have opted for more modern cash balance plan designs that don’t carry the same level of risk.
But for those concerned about risk in their current DB plans, I think the outlook is positive. Despite the market uncertainty that has defined the global economy in 2025, interest rates, high pension plan funding and current stock market performance have created favorable conditions for businesses looking to de-risk their pension plans.
That said, conducting a PRT transaction requires due diligence in selecting the right service providers and insurance carriers. While these transactions take some time to complete, companies can opt for an insurance buy-in to lock in rates as they work toward a buy-out or plan termination.
Other ways for dealing with some of the downside risks, such as the stock market or interest rates dropping during the process of a PRT transaction, include changing investments to hedge the volatility of assets and interest rates.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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