Estimated retiree buyout cost as a percentage
of accounting liability increased by 40 bps from
102.8% to 103.2% in August
As the Pension Risk Transfer market continues to grow, it has
become increasingly important for plan sponsors to monitor
the annuity buyout market when considering a plan termination
or de-risking strategy. The timing of the annuity buyout can
ultimately impact the cost, as well as the plan’s funding and
accounting measurements. Other factors also impact annuity
buyouts such as size, complexity, and competitive landscape,
which should be taken into consideration with the estimated
cost illustrated in the MPBI.
During August 2020, average accounting discount rates
increased by 24 bps, while annuity purchase rates increased
by 20 bps. This caused the estimated retiree buyout cost as
a percentage of accounting liability (accumulated benefit
obligation) to increase from 102.8% to 103.2%.
When considering these results, please keep the following
information in mind:
- Annuity pricing composites are provided by the following
insurers: Prudential Insurance Company of America,
American United Life Insurance Company (OneAmerica),
American General Life Insurance Company (subsidiary of
AIG), Minnesota Life Insurance Company (Securian), Pacific
Life Insurance Company, and Metropolitan Tower Life
Insurance Company (MetLife).
- Baseline accounting obligations are estimated using a
representative retiree population, the FTSE Above Median
AA Curve, and insurance company data.
- Plan sponsors should note that specific characteristics in plan
design or participant population could make settling pension
obligations with an insurer more or less costly than estimated.
Figure 1: Milliman pension buyout index

About the MPBI
The Milliman Pension Buyout Index (MPBI) uses the FTSE Above Median AA Curve and annuity purchase composite interest
rates from several insurance companies to estimate the cost, as a percentage of accounting liability, of transferring retiree pension
obligations to an insurer. To review previous monthly findings, visit milliman.com/en/periodicals/Milliman-Pension-Buyout-Index.