Rising interest rates are boosting corporate pension plans, providing finance chiefs with an option to lighten their companies’ balance sheets and transfer obligations to insurers.
PREVIEWWhen interest rates rise, liabilities for defined-benefit plans—a type of pension plan that promises fixed amounts to participants—shrink.
They can also move just a portion of their pension obligations, but that still requires a high funding status.
“If interest rates level off or decrease, the funded status could fall pretty quickly,” said Matt McDaniel, a partner at Mercer who advises companies on pension risk transfers.
Recent stock market declines have hurt some defined-benefit pension plans invested in publicly traded equities, Mr. McDaniel said.
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