October’s PRT costs hit highest levels in over three years: Milliman

Global consulting and actuarial firm Milliman has reported that the October estimated retiree pension risk transfer (PRT) cost reached 101.9% of a plan’s accounting liabilities (accumulated benefit obligation, or ABO).

As per its latest Milliman Pension Buyout Index (MPBI) During October, the estimated cost to transfer retiree pension risk to an insurer in a competitive bidding process increased from 101.1% of a plan’s ABO to 101.9% of those liabilities.

Meanwhile, during the same period, the average annuity purchase cost across all insurers in our index rose 90 basis points, from 103.5% to 104.4%.

According to the firm, the competitive bidding process is still estimated to save plan sponsors about 2.5% of PRT costs as of October 31, “just slightly higher than at the end of September.”

Jake Pringle, a Milliman principal and co-author of the MPBI, commented, “Even with interest rates climbing again during October, retiree buyout costs fell short, rising to their highest levels in over 3 years.

“Several insurers have reached capacity for 2023, so those plan sponsors with PRT on their agenda may see less competition and potentially higher pricing to close out the year.”

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