Verizon, General Motors, Ford and Heinz have all moved part of their pension obligations off their books and into annuities run by insurance companies, The Washington Post’s Wonkblog reported on Monday. The move, called de-risking, requires companies to pay a lump sum to purchase a group annuity from an insurance company. The insurer then takes over the retirement payments, wiping troubling and erratic pension obligations off the books of the purchaser. For retirees, the move should make no difference: Their checks come as always, assuming that the insurance company that sells the annuity remains in fine financial shape. For the companies buying the annuities, the change offers an opportunity to shed volatile risk. That prospect has grown more appealing to companies in recent years as low interest rates and a volatile stock market have caused companies to pour billions into their pension funds to keep pace with accounting rules. Now that the stock market is roaring and interest rates are expected to increase, buying annuities to get rid of pension obligations is becoming less expensive, which means that interest in de-risking is rising. With many traditional company pension plans frozen, some advocacy groups worry that “de-risking” will end up being yet another blow to retirement security.
