Human resources consultancy Mercer has developed a monthly index to provide employers trying to reduce their pension plan risk with information on the average premium insurers charge to assume responsibility of retirees' benefits when employers purchase a group annuity.
The Mercer US Pension Buyout Index will allow employees to evaluate the cost of a benefit buyout against the administrative costs, premiums charged by the Pension Benefit Guaranty Corp. and the risks that go along with remaining liable for retiree benefits. The index will be complied from data received by New York-based Mercer from major annuity insurers.
"Many plan sponsors we have spoken with are eager for unbiased third-party information on where annuity pricing stands and how the pricing may change over time," said Sean Brennan, a principal with Mercer's financial strategy group, in a written statement.
The index launch follows two major annuity purchases in 2012. General Motors Co. paid $25.1 billion to Prudential Insurance Co. of America for a group annuity that replaced benefits for salaried GM employees who retired by Oct. 1, 1997.
Likewise, Verizon Communications Inc. purchased an annuity from Prudential to shift about $7.5 billion in benefits for nearly 41,000 management participants who retired and started receiving benefits before Jan. 1, 2010.