There are a number of circumstances under which plan sponsors of traditional qualified defined benefit (DB) and defined contribution (DC) plans, along with non-qualified SERP plans, would encounter the need to purchase an individual Single Premium Immediate Annuity (SPIA) on behalf of a retiring plan participant:
- The plan sponsor of an ongoing DB plan had previously completed a PRT annuity purchase lifting out all plan retirees, and doesn’t want to continue incurring future administrative costs and PBGC fees on new retirees as they retire;
- The plan sponsor of a relatively small ongoing DB plan prefers to purchase and distribute a SPIA to a newly retiring plan participant in lieu of administering monthly benefit payments long-term;
- A participant in a DC plan wishes to annuitize all or a portion of their account balance at the time of retirement. In this circumstance, a participant’s account balance would purchase a greater SPIA monthly benefit due to the use of institutional pricing using group mortality tables vs. retail pricing using individual mortality tables;
- At termination of employment, a participant in certain non-qualified SERP plans is insistent on securing the funding of their SERP benefit with an Insurance Carrier in lieu of receiving payments from the plan.
BCG provides expert assistance in each of the circumstances outlined above. Within 48 hours of BCG’s receiving a quote request, the plan sponsor and/or retiree would receive a summary of competitive pricing from multiple highly rated Insurance Carriers along with a Carrier Due Diligence Package. BCG only represents the highest rated carriers and, in BCG’s opinion (based on many years of experience and carrier due diligence), each carrier presented can and should be considered to be a provider of the “safest available annuity” under the Department of Labor’s Interpretive Bulletin 95-1. Even though the Plan Sponsor/Participant makes the carrier selection, BCG is supportive and stays involved throughout the selection and placement process.