A "buy-out" strategy provides plan sponsors with a way to remove pension risk and benefit liability from the plan on either a partial (covering a portion of plan participants) or full (complete plan termination) basis.
Guaranteed group annuity contract that transfers all future obligations and all risks from the plan sponsor to Pacific Life for the covered group
Completely removes the liability from the plan sponsor’s balance sheet
Plan sponsor is no longer subject to premiums payable to the Pension Benefit Guarantee Corporation (PBGC)
Pacific Life issues individual annuity certificates and makes all payment directly to annuitants
Pacific Life provides all annuitant servicing and bears all administrative expenses
May be funded in either Pacific Life’s general account or a separate account.
When to Use
For the complete or partial plan terminations of defined benefit and nonqualified deferred compensation plans
To reduce risk and/or administrative expenses and investments (PBGC premiums, audit, actuarial evaluations, etc.)