Pension Risk Transfer
Pension Risk Transfer (PRT) is an industry term used to describe the use of Group Annuity Contracts (GAC’s) for plan terminations and the reduction of risk and expense associated with participants in pay status and in some instances terminated vested participants. It also refers to a lump sum offer for terminated vested participants in an ongoing plan again for the purpose of risk and expense reduction.
PRT has become very popular with pension managers because of the many risks and expenses that a large group of retirees and terminated participants present, none of whom are still actively contributing to the benefit of the plan sponsor.
PRT is an excellent tool for managing expenses and for balance sheet clean up without a termination and is usually an early step in a glide path to termination.
Brentwood PRT Services
We perform all the broker functions for plan terminations and retiree and terminated vested group annuity contract PRT transactions. Since the Executive Life bankruptcy and the advent of Department of Labor (DOL) Interpretive Bulletin 95-1 annuity brokers have largely been replaced by a consultant/fiduciary. The term broker and consultant or fiduciary can sometimes cause confusion.
- A broker charges a commission paid by the insurer and by law works for the insurer.
- A consultant performs the broker functions but charges a flat fee and works for the plan sponsor.
- A fiduciary performs the broker functions, charges a flat fee and takes on fiduciary risk and works for both the plan sponsor and its participants. The DOL is encouraging plan sponsors to hire a fiduciary for GAC’s for DB Plans.
Besides offering to work as a flat-fee based consultant we also offer two types of fiduciary work:
- A co-fiduciary 3(21) makes a written recommendation as to the winning insurer(s) but the ultimate decision resides with the plan sponsor.
- As an Independent fiduciary 3(38) the plan sponsor outsources the decision on the winning insurer(s) to Brentwood.
Our fiduciary services for GAC’s are based on the Department of Labor Interpretive Bulletin 95-1 and our own internal analysis.
Dol Interpretive Bulletin 95-1
We strongly recommend that before a plan sponsor enters into a group annuity contract they should familiarize themselves with this extremely important document. We would be glad to help you better understand how this bulletin affects plan fiduciaries and their responsibility to their participants.