Plan Term - Small Annuity Purchase

[ndj2377]

Plan sponsor will be finalizing the termination process during the 1st quarter of 2018. They have 40 annuitants. Expected liability for these annuitants is approximately $350,000.

We are having a hard time finding firms to bid on the annuities due to the overall size. Does anyone have firms that they have had success with smaller plans?

Thanks.

[My 2 cents]

Average annuity cost is under $9,000?  What's that work out to, $50 a month for life?  Not much use in providing retirement security.

If the plan is being terminated, how much would it cost to purchase 40 individual annuity contracts for an average monthly payment of $50?  $600,000?  $700,000?  Might be a sine qua non to terminating the plan, if more competitively priced annuities cannot be had.  Remember, the only useful measure of the liability for participants in pay status in a terminating plan is the amount of money that will need to be spent to buy those annuities.  Where did the $350,000 figure come from?

[ndj2377]

Estimated the $350k using a 2.50% rate. It is a small plan, older population with average monthly benefits of $75 per month. 

 

Just looking for some some other options for annuity providers. I have one that looks like they may bid, but would like to have a few more possibilities. 

[Effen]

Mutual of Omaha would probably take them.  If you are waiting until early 2018, you can also try One America and Pacific Life.  A lot of insurance companies won't bid on anything less than $5 million.  It is also more difficult to place contracts in the 4th quarter as insurance companies are focused on the larger contracts.

If you can't find a company to deal with you directly, you can go to Dietrich or Brentwood.  They both have open contracts with several companies and can usually place an annuity of any size - of course they will charge a healthy fee for this service.

[figure 8]

2 hours ago, Effen said:

If you can't find a company to deal with you directly, you can go to Dietrich or Brentwood.  They both have open contracts with several companies and can usually place an annuity of any size - of course they will charge a healthy fee for this service.

BCG Pension Risk Consultants is another company that does this. (I'm not affiliated with any of these companies, and I'm sure there are more, but just throwing out another name I know of.)

[MSC]

Happy to discuss this with you as our firm does this type of annuity placement work. The biggest consideration is making sure that you use someone that will help with the selection of the insurer since the selection is a fiduciary decision. It's not enough to just reach out to an insurer to see if they'll take on the annuities.

There are a few new entrants into the annuity placement marketplace that will be interested in your case based on size. Running the appropriate process will ensure that the maximum number of insurers are bidding on your case which will help your client get the best price.

Michael

michael.clark@psolve.com