When A Long-Term Promise Changes Hands

Why more companies are turning to pension-risk transfer

by George Palms

A defined benefit pension represents a long-term promise to employees and retirees. For the employer sponsoring the pension, though, fulfilling that promise can come with costs that fluctuate from year to year. Investment returns, interest rates, administrative fees, and how long participants live can all affect those costs. Even a frozen plan remains on the company’s balance sheet and requires ongoing management.

Ensuring benefits can be paid throughout retirees’ lifetimes also requires companies to devote financial and operational resources to managing the plan. For some employers, those are resources they would rather direct toward their core business.

This is where pension risk transfer comes in.

What Is Pension Risk Transfer?

Pension risk transfer, or PRT, allows an employer to transfer financial and administrative responsibility for some or all of its pension obligations to an insurance company. PRT insurers, such as the Banner Life family of companies, are dedicated to safeguarding and administering pension benefits. Covered retirees continue receiving their monthly pension payments, but those payments come from the insurer instead of the employer’s pension plan.

PRT is not an all-or-nothing decision. A company can transfer responsibility for the pension payments of one group of retirees and plan participants who are not yet retired, while continuing to manage the rest of the plan, or it can transfer the entire pension plan to an insurer.

For participants whose benefits are transferred to an insurer, the amount of their covered pension benefit does not change. What changes is who pays that benefit. The insurer also becomes the point of contact for ongoing service and support.

That long-term responsibility is an important part of PRT. While the transaction allows an employer to step away from certain pension risks and responsibilities, the insurer assumes responsibility for making the covered benefit payments over the long term.

Why Are More Companies Considering PRT?

For a company to transfer its pension responsibilities to an insurer, it first needs to have enough money set aside in its pension plan to support the benefits it has promised. Today, many corporate pension plans are in a strong position to do just that.

One way the pension industry measures this is through “funded status,” which compares the money a plan has set aside with the amount it expects to owe in pension benefits. According to the Banner Life family of companies’ 2Q 2026 PRT Monitor, pension plans are about 110% funded on average. In simple terms, that means the average plan had about $110 set aside for every $100 it expected to owe in benefits.

However, having enough money set aside today does not eliminate the uncertainty of managing a pension plan for decades. Markets can rise or fall, interest rates can change and retirees may live longer than expected. Any of those changes can affect how much it ultimately costs a company to keep its pension promises. For companies with well-funded plans, PRT offers an opportunity to transfer that uncertainty to an insurer while the plan is in a strong financial position and avoid risks that may not be well understood or measured. For example, how many of employers are considering the following questions?  With modern medical and technological advancements, have employers adjusted their expectations of retiree longevity and the impact making payments for longer periods of time might have? And what about the next advancements in biotechnology, robotics or artificial intelligence?  Do they have a clear understanding of the total costs of managing the plan and potential costs under different future scenarios?

This increasing uncertainty has helped make PRT an increasingly common choice for U.S. companies. In 2025, 697 PRT transactions totaling $48.7 billion were completed in the U.S., according to Aon. It was the fourth consecutive year that the market hit $45 billion or more.

The appeal of PRT goes beyond reducing financial uncertainty. Managing a pension plan requires people, time, and resources. Transferring those responsibilities to an insurer can allow a company to spend less time managing a pension plan and focus more of its resources on running its business.

How Does A Company Prepare For PRT?

Like all things in business, a successful PRT transaction takes preparation.

Before approaching insurers, a company needs a clear picture of its pension plan, including who is entitled to benefits, how much each person should receive, and when those payments are due. Having accurate information helps insurers understand the pension benefits they may be taking responsibility for and what it will cost to provide them.

Companies typically work with pension advisers and other specialists throughout the process. Together, they determine which pension benefits the company wants to transfer, prepare information for insurers, and evaluate the options available to them.

Choosing an insurer involves more than comparing price. Because the insurer may be responsible for this group of annuitants for decades, factors such as financial strength, experience, and customer service can all play a role in the decision.

After an insurer is selected, attention turns to preparing the annuitants for the change. The company and insurer work to confirm payment information and clearly communicate what is changing, when the transition will take place and where annuitants can go with questions.

The Importance Of The Annuitant Experience

For a retiree, a pension is more than a payment. It may be the income they have counted on for years. That makes clear communication before and during the transition especially important.

Good service also means giving annuitants choices in how they get that help. Some may prefer to manage routine needs online, while others want to speak with someone who understands their pension and can answer questions directly.

How an insurer handles those interactions matters, too. The goal should not simply be to resolve a call as quickly as possible, but to resolve the annuitant’s question accurately and completely. That requires service teams that understand the pension plans they support and are prepared for the specific questions annuitants may have.

For plan sponsors considering PRT, this is why selecting an insurer involves more than comparing price. Financial strength is essential, but so is the insurer’s ability to communicate clearly, administer benefits accurately and support annuitants over the long term.

A Promise That Can Last Decades

The continued growth of the PRT market shows that more companies are taking a closer look at how they manage pension promises that may extend decades into the future. With many corporate pension plans in strong financial positions and PRT becoming a more established option, plan sponsors have more opportunities to consider whether transferring pension responsibilities makes sense for their businesses.

The market is also giving companies more flexibility in how they approach PRT. A transfer does not have to happen all at once. Employers can take steps over time, transferring portions of their pension responsibilities as their plans and business needs change. That flexibility could become increasingly important as more companies consider what role they want their pension plans to play in the years ahead.

Continued growth in the PRT market will also place greater importance on what happens after a transaction is complete. As insurers take responsibility for more annuitants, the ability to provide reliable payments, clear communication, and strong service over the long term will remain an important part of the PRT equation.

For employers that pursue PRT, the decision is about more than reducing financial uncertainty or freeing up resources. It is also about deciding who will be responsible for their plan members in the years ahead.

A PRT transaction may close on a particular day, but the responsibility being transferred can last for the remainder of a retiree’s life.

Ultimately, PRT changes who keeps the pension promise. It does not change the promise itself.