Variable Annuities: A retirement plan design with less contribution volatility
Some multiemployer pension plans have had their funded status deteriorate due to the difficult and volatile investment markets of recent years, leading to either increased contributions or reduced benefits—or in some cases both. For some multiemployer plans, this has made collective bargaining more difficult, reduced participant pay increases, and caused some employers to struggle to stay competitive. Multiemployer plan trustees may be looking for alternative, sustainable ways to provide participants with lifelong benefits that allow for more predictable contributions.
One alternative for multiemployer trustees to consider is changing the pension plan so that future accruals are paid through a variable annuity plan. Much like changing to a defined contribution (DC) plan, changing to a variable annuity plan shifts the plan's investment risk for future benefit accruals to the participants. This paper describes variable annuity plans and some advantages they may have over DC plans.
MAP-21 and de-risking considerations
2013 Pension Funding Study
Pension Funding Index, March 2013
Pension Funding Index, February 2013