The U.S. pension risk transfer (PRT) market has experienced significant growth over the past decade, emerging as a strategic solution for plan sponsors seeking to reduce financial volatility and administrative burdens associated with defined benefit pension plans. Fueled by a combination of rising interest rates, favorable funding levels and a growing focus on de-risking, the market has consistently gained momentum, with recent annual transaction volumes surpassing $50 billion. However, a wave of lawsuits in 2024 introduced uncertainty and raised questions about the future of the market.
Despite the uncertainty, the U.S. PRT market continued its upward trajectory in 2024, achieving a record 401 transactions and generating $51.8 billion in premium volume, just shy of the all-time high set in 2022 (Figure 1). While the number of jumbo deals (those exceeding $1 billion) declined compared with the previous year, midsize ($100 million–$500 million) and large transactions saw significant growth, effectively offsetting the dip in megadeals. Notably, five jumbo retiree lift-outs, including transactions from IBM, Verizon, Shell, 3M and Entergy, accounted for approximately $20 billion in premium, representing about 40% of the total market volume. This diversification in deal sizes underscores the market's resilience and adaptability. Insurer engagement remains robust, with 14 insurers each writing over $1 billion in PRT premium. The market's attractiveness continues to draw interest from both existing players and new entrants, including reinsurers, signaling sustained momentum and capacity expansion in the years ahead. While the first half of 2025 saw a decline, more recent increases have been observed.
Figure 1. U.S. PRT market
PRT has proven to be a win-win strategy for all parties involved. For plan sponsors, PRT offers a valuable tool to reduce balance sheet volatility and administrative burden, helping them meet long-term de-risking objectives with greater certainty. By transferring liabilities to life insurers, sponsors gain cost predictability and can focus more squarely on their core business.
Life insurers, in turn, are well positioned to assume these obligations due to their expertise in managing long-duration liabilities, access to diversified investment portfolios and robust regulatory capital frameworks. Policyholders benefit from continued security of their promised benefits, now backed by highly regulated insurance entities with deep experience in annuity administration. As a result, the growing PRT market reflects strong alignment across stakeholders — driving risk reduction for plan sponsors, stability for retirees and sustainable growth opportunities for insurers.
Despite the market’s momentum (or perhaps because of it), PRT transactions have drawn increased legal scrutiny. Several high-profile lawsuits have emerged, challenging the fiduciary processes behind plan sponsors’ decisions to transfer pension liabilities to insurance companies. Notable cases, such as Grant v. Lockheed Martin and Parker v. United Technologies, allege that plan fiduciaries failed to adequately evaluate the financial strength of insurers or consider alternative options, thereby breaching their fiduciary duties under ERISA. ERISA sets standards of conduct for those who manage retirement plans and their assets, requiring them to act prudently and in the best interests of plan participants.
One of the earliest and most prominent cases, Lee v. Verizon Communications Inc., challenged a $7.5 billion annuity transaction with Prudential. Although the courts ultimately dismissed the case — citing lack of concrete harm and upholding Verizon’s actions — the argument has recently resurfaced through a number of lawsuits (Figure 2).
| Lawsuit name | Plan sponsor | Insurance company | Reinsurer | Date filed |
|---|---|---|---|---|
| Lee et al. v. Verizon Communications Inc. et al.* | Verizon Communications | Prudential Financial | NA | 2012 |
| Konya et al. v. Lockheed Martin Corp. | Lockheed Martin | Athene | NA | March 2024 |
| Piercy et al. v. AT&T Inc. et al. | AT&T Inc. | Athene | NA | March 2024 |
| Camire et al. v. Alcoa USA Corp., et al.* | Alcoa Corp. | Athene | NA | March 2024 |
| Bueno et al. v. General Electric Company et al. | General Electric | Athene | NA | July 2024 |
| Dempsey et al. v. Verizon Communications Inc. et al. | Verizon Communications | Prudential Financial | Reinsurance Group of America (RGA) | December 2024 |
| Doherty v. Bristol-Myers Squibb Co. et al. | Bristol-Myers Squibb | Athene | NA | January 2025 |
| TBD | IBM | Prudential Financial | Unknown | September 2025 |
Common allegations in these lawsuits include insufficient due diligence, lack of participant notice or input, and failure to ensure equivalent or superior protections for retirees under the new arrangement. Plaintiffs argue that these decisions compromise participant protections by transferring obligations to private insurers that are not backed by the Pension Benefit Guaranty Corporation (PBGC), thereby exposing retirees to a loss of federal guarantees. In one case (Dempsey et al. v. Verizon Communications Inc. et al.), the fiduciary involved (State Street Global Advisors) faces conflict of interest scrutiny given its financial interest in the parties involved in the transaction. While no clear legal precedent has yet been established, these cases signal a growing willingness among participants — and their attorneys — to question the decision-making frameworks underpinning PRT transactions.
Plaintiffs argue that insurance company strategies may not align with ERISA’s fiduciary standard to select the “safest available annuity provider.” Additional concerns stem from the use of offshore reinsurance entities, particularly in Bermuda, which some claim could limit regulatory oversight and reduce the protections available to retirees under U.S. insurance guaranty systems.
The use of offshore reinsurance entities and asset management ownership is not unique to PRT business but rather reflects broader trends within the insurance industry. Many insurers reinsure liabilities through affiliates domiciled in jurisdictions such as Bermuda, where regulatory frameworks can offer greater flexibility in capital management.
According to the Bermuda Monetary Authority, a recent study by Moody’s shows that asset allocations of long-term insurers in Bermuda utilize similar investment allocations to those in the U.S. and that 77% of assets held by Bermuda long-term insurers are investment grade or higher.[1]
Additionally, asset management firms have become increasingly active in the insurance space, purchasing large blocks of business or acquiring insurers, including those that participate in the U.S. PRT market. These practices are well established, and proponents argue they enable insurers to offer competitive pricing and innovative investment solutions.
Plan sponsors must follow rules under ERISA and subsequent legislation such as the Pension Protection Act of 2006, which requires sponsors to contribute enough to keep the plan adequately funded, based on actuarial calculations that provide 100% funding of the liability over time. While plan fiduciaries must invest prudently, diversifying assets and acting in the best interest of participants, ERISA does not prescribe specific asset allocations. The solvency of the plan depends on the sponsor’s willingness and ability to fund it. If the sponsor becomes insolvent and the plan is underfunded, the PBGC steps in — but only up to guaranteed limits.
The PBGC provides a federal backstop for private sector defined benefit pension plans that are terminated without sufficient assets. It guarantees basic retirement benefits earned before plan termination, including normal retirement income, early retirement benefits, disability benefits (if the disability occurred before termination) and survivor annuities. However, these guarantees are subject to annual limits based on the participant’s age and benefit type. As of 2025, the maximum guaranteed benefit at age 65 is approximately $7,430 per month,[2]or $89,000 annually, for a single-life annuity. Benefits above this cap may be lost if the plan is underfunded.
When pension liabilities are transferred to an insurance company through PRT, retirees become annuity holders, and their protections shift from federal pension law (ERISA and PBGC) to safeguards of the U.S. insurance regulatory system. Insurance companies are regulated at the state level and must meet strict reserve, capital and investment requirements to ensure they can meet long-term annuity obligations. Many insurers also hold PRT assets in separate accounts that are protected from general creditors in the event of insolvency. If an insurer were to fail, retirees may receive limited protection through their state’s guaranty association, which typically provides up to $250,000 in present value of annuity benefits —though this coverage varies by state.
In 2016, the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) produced a comparison between the PBGC and the state guaranty association system that protects annuity holders when pension liabilities are transferred to insurance companies.[3] The report emphasizes that both systems offer meaningful safeguards but are structured differently, and it cautions against comparing them based solely on coverage limits (Figure 3). In fact, a study conducted by WTW as part of the report concluded that both systems would protect the vast majority of participants for 100% of their benefit payments. Specifically, the WTW study found that with a funded ratio of at least 75%, both systems would protect over 90% of aggregate benefits. The PBGC provided higher protection levels in scenarios where pension plans had benefits below PBGC guaranty limits without recent increases. Conversely, state guaranty associations offered better protection when benefits either exceeded PBGC limits, had recent increases, or when funded ratios were relatively high. The report concluded that both frameworks are well established, effective and supported by strong regulatory oversight.
| Feature | PBGC | Insurance system |
|---|---|---|
| Type of protection | Federal guarantee for private-sector defined benefit pension plans | State-based guarantee for annuity contracts via guaranty associations |
| Coverage trigger | Plan termination with insufficient assets | Insurance company insolvency |
| Coverage limit (as of 2025) | Up to approximately $89,000/year at age 65 (single-life annuity) | Typically up to $250,000 in present value of annuity benefits (varies by state) |
| Funding source | Premiums paid by plan sponsors, investment income, recoveries from terminated plans | Funded by insurance industry assessments within each state |
| Uniformity | Consistent nationwide coverage limits and rules | Coverage limits and rules vary by state |
| Applies to | ERISA-covered defined benefit plans | Annuities issued by licensed life insurers |
| Oversight | Federal agency (PBGC) | State departments of insurance and guaranty associations |
| Post-transfer applicability | Does not apply after pension liabilities are transferred to an insurer | Applies once pension obligations are assumed by an insurer |
Recent class-action lawsuits have brought increased scrutiny to PRT transactions, particularly concerning the selection of annuity providers. Plaintiffs allege that certain plan sponsors and fiduciaries failed to choose the "safest available" annuity providers, as mandated by the Department of Labor's Interpretive Bulletin 95-1.
However, to date, no financial harm to retirees resulting from these PRT transactions has been reported. Courts have issued mixed rulings: Some cases have been dismissed due to lack of demonstrated injury, while others have proceeded to discovery. Insurers involved in PRT deals are typically highly rated and well capitalized, operating under stringent state regulatory oversight. The American Council of Life Insurers emphasizes that life insurers are experts in managing long-term risks and are subject to robust regulatory frameworks, ensuring the security of retirees' benefits.
The PRT market's growth reflects its effectiveness in helping plan sponsors achieve de-risking objectives while maintaining benefit security for retirees. Insurers' financial strength and regulatory compliance continue to support the stability and reliability of these transactions.
Insurance companies in the U.S. are generally considered financially stable due to strict state regulatory oversight that requires companies to:
Life insurers, in particular, are subject to rigorous capital standards and are required to hold assets sufficient to meet long-term obligations such as annuity payments. Historically, insolvencies among large life insurers are rare. In the relatively few instances where failures have occurred — such as Executive Life in the early 1990s or Penn Treaty in the 2010s — state guaranty associations stepped in to ensure that policyholders continued to receive their benefits, often with minimal disruption. Additionally, the insurers participating in the PRT market are typically highly rated by credit agencies such as AM Best, Moody’s and S&P and include some of the most well-capitalized institutions in the industry. While no system is risk-free, the insurance regulatory framework has proven to be effective in protecting policyholders, even under stress.
