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MICHAEL DOMINGOS Head of Defined Benefit

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I. Understanding the Buy-In Structure

II. Market Forces Driving Buy-In Adoption

III. An Emerging Application: The Buy-In as a��Funded-Status Hedge

IV. Implementation Considerations

V. Conclusion

The U.S. Pension Risk Transfer (PRT) market has entered a new era. Historically dominated by terminal group annuity buy-outs, the market is now witnessing meaningful momentum behind a structurally distinct vehicle: the pension buy-in. Driven by elevated funding levels, favorable annuity pricing, and increasing plan sponsor sophistication, buy-ins are transitioning from a less understood construct borrowed from the U.K. market into an actionable, strategically compelling option for U.S. plan sponsors.

We will examine the structural characteristics of buy-in contracts, the market forces driving their adoption, and a lesser-appreciated application emerging in the current environment: the use of buy-ins as a dynamic de-risking bridge for plans not yet ready for full termination, but unwilling to leave funded-status gains exposed.

A pension buy-in is a bulk annuity policy in which an insurance company assumes the economic risk of a Defined Benefit (DB) plan's liabilities, covering a defined population of participants, while the plan itself remains the policyholder and legal obligor.��Unlike a traditional buy-out, participants retain their relationship with the plan, and the insurer pays the plan, not the participant. The plan sponsor holds the buy-in policy as a plan asset.

This structural distinction carries significant optionality. Buy-ins offer the economic risk transfer of a buy-out, including longevity, interest rate, and investment risk, without requiring plan sponsor actions involved in a traditional settlement. The insurer's obligation flows to the plan. The plan's obligation to participants remains intact.

In the U.K., where buy-ins have been used for nearly two decades, the instrument is now mainstream, often serving as a precursor or stepping stone to a full scheme wind-up. The U.S. market has been slower to embrace this structure, due in part to ERISA considerations, accounting treatment questions, and a preference for terminal transactions. However, each of these barriers has been addressed by recent regulatory guidance, evolving actuarial practice, and growing insurer appetite.

Favorable��Funding Levels Create a Window—and a Problem

The convergence of rising interest rates and equity market performance since 2022 has produced a material shift in DB plan funding ratios. According to aggregate pension tracking data, the average funding ratio for Fortune 500 plans has hovered near or above 100% for an extended period, levels not seen consistently since the early 2000s.ⁱ For many CFOs and pension committees, the question is no longer how to get funded, but rather how to protect what they have.

This is precisely the environment in which buy-ins become acutely relevant. A fully funded plan that waits for a traditional buy-out opportunity—subject to Pension Benefit Guaranty Corporation (PBGC) termination timelines, participant communication requirements, and IRS determination letter processes that can span 12 to 24 months—runs meaningful risk of watching discount rates shift, equity portfolios correct, or liability values move in adverse ways before transactions can close. A buy-in, by contrast, can be implemented relatively quickly, locking in economic gains without triggering settlement.����

Insurer Capacity and Competitive Pricing

The PRT insurance market has seen new entrant activity and expanded capacity from existing carriers. Insurers have increasingly signaled willingness to participate in buy-in structures alongside traditional buy-out business, recognizing plan sponsors' desire for flexibility. The competitive dynamic among insurers has led to competitive pricing spreads and made buy-in economics increasingly attractive relative to maintaining plan assets in a liability-driven investing (LDI) framework.

Regulatory and Accounting Clarification

Concerns about the accounting treatment of buy-ins under Accounting Standards Codification (ASC) 715 have been materially clarified. When a buy-in contract qualifies as a plan asset, it offsets the projected benefit obligation (PBO) on the sponsor's balance sheet, reducing net pension liability. Financial Accounting Standards Board (FASB) guidance and actuarial standards have provided greater comfort that a properly structured buy-in, meeting criteria related to matching, irrevocability, and benefit security, can achieve this accounting recognition. This resolved a historical barrier to adoption.

Market Growth: A Data-Driven Perspectiveⁱⁱ

�����Ѹ鴡’s U.S. Group Annuity Risk Transfer Sales Survey provides the most authoritative longitudinal view of the buy-in market’s emergence and growth. The data tells a striking story: From a single inaugural transaction in 2012 to 17 contracts totaling $17.5 billion in 2025, the buy-in has transformed from a plan sponsor curiosity into a material and growing segment of the PRT market.

The market’s growth trajectory falls into three distinct phases:

• FIRST PHASE: 2012 - 2017
  The first phase was an exploratory period characterized by minimal transaction volume (fewer than three to four deals in any given year) as plan sponsors, insurers, and legal counsel worked through the structural and regulatory mechanics of adapting the U.K. buy-in model to an ERISA framework. By mid-2019, LIMRA reported that only 17 buy-in contracts had ever been executed in the United States in total, a figure that underscores just how nascent the instrument remained through most of the prior decade.

• SECOND PHASE: 2018 - 2020��
  This phase marked the market’s first genuine inflection. 2019 saw six buy-in sales totaling $1.9 billion, more than doubling the annual premium record set just the prior year, according to the survey. This period reflected growing insurer willingness to underwrite the structure, along with increasing consultant and plan sponsor familiarity with the instrument’s mechanics and governance requirements.

• THIRD PHASE: 2021 - PRESENT��
  The third phase represents the buy-in’s emergence as a mainstream de-risking tool. The survey continues to report that, in 2021, buy-in premium reached a then-record $3.9 billion across six contracts, more than double the prior year’s volume, driven by rising funded ratios and accelerating insurer capacity. Subsequent years have sustained this elevated level: seven contracts for $3.6 billion in 2022, eight contracts for $3.9 billion in 2023, and a record ten contracts, totaling $3.7 billion in 2024. �����Ѹ鴡’s recently announced 2025 volumes show a spike in premium with $17.5B across 17 contracts. Cumulatively, the U.S. buy-in market has now transacted nearly $40 billion in premium since tracking started in 2019.

Taken together, these forces along with the LIMRA data help to illustrate not just growth in volume, but the steady maturation of buy-ins from a niche structure to a repeatable, strategically relevant solution.

While the narrative around buy-ins has largely centered on their role as a precursor to eventual plan termination, current market conditions have illuminated a distinct and underappreciated use case: deploying a buy-in as a standalone funded-status hedge for plans with no near-term termination intention.

The Strategic Context

Consider a plan sponsor with a corporate DB plan that is 105% funded relative to its projected benefit obligations (PBO). Perhaps, due to labor relations, collective bargaining agreements, or other competing business priorities, the sponsor has no immediate plans to terminate the plan. Yet, the investment committee is acutely aware that the funded surplus they have painstakingly built could erode rapidly in a risk-off environment. Traditional LDI immunization strategies reduce but do not eliminate this exposure. They still leave the sponsor subject to longevity risk, basis risk, and the residual volatility inherent in managing a long-dated liability portfolio.

Why This Works Particularly Well Today

Three conditions make the current environment unusually hospitable to this strategy.

• First, the inverted or flat yield curve has made long-duration fixed income (the traditional alternative) less attractive on a risk-adjusted basis, even for LDI purposes.

• Second, annuity pricing for retiree populations has tightened considerably as insurers compete aggressively for high-quality, well-funded plan business.

• Third, the retiree and terminated vested cohort of many mature plans now represents a disproportionately large share of total liability, often 60% to 80%, making a targeted buy-in for these populations a substantial de-risking event in its own right.

Sponsors pursuing this approach are, in effect, using the buy-in as a macro hedge on funded status, trading the complexity and cost of ongoing LDI management for a single, clean, actuarially certain transfer.��

Comparing the Alternatives

Plan sponsors evaluating this strategy typically compare it against three alternatives:

1. continuing their existing LDI glide path,��

2. executing a partial buy-out of the retiree population, or��

3. implementing a longevity swap.��

Each has merit in specific contexts, but the buy-in distinguishes itself on the dimension of execution simplicity. Unlike a longevity swap, which transfers only mortality risk and requires ongoing cash flow management, a buy-in transfers all economic risk. Additionally, unlike a partial buy-out, which requires participant notification, annuity certificate distribution, and PBGC coordination, a buy-in can be transacted efficiently, with the plan as policyholder throughout.

Sponsors exploring buy-in structures should attend carefully to several implementation dimensions. Actuarial due diligence on participant data quality is paramount. Insurers will price based on the underlying census, and data anomalies can delay or reprice transactions. Governance processes should be initiated early, as investment committee and board approvals are typically required and may involve unfamiliar concepts for trustees accustomed to traditional PRT transactions.

Since the buy-in policy, unlike a buy-out, remains a plan asset and is subject to the plan's fiduciary oversight, counterparty selection requires rigorous analysis of insurer financial strength ratings, reinsurance arrangements, and claims-paying capacity. Legal counsel familiar with ERISA's prohibited transaction rules and the specific DOL guidance on PRT transactions should be engaged to structure the agreements appropriately.

Finally, for sponsors, the conversion from buy-in to buy-out represents a moment of choice rather than urgency. Having already secured pricing, insurer capacity, and economic certainty, the sponsor retains discretion over when settlement is ultimately executed, aligning transaction timing with governance readiness, participant communication strategy, and broader strategic priorities. In effect, the buy-in positions the sponsor to complete the journey to buy-out on its own terms, transforming a well-hedged liability into full settlement when organizational conditions, and not market pressure, dictate the outcome. Insurers are increasingly writing buy-in contracts with explicit conversion mechanics, making the instrument not just a hedge, but a sequenced step in a comprehensive de-risking journey.

The U.S. pension buy-in market is at an inflection point. What began as a niche instrument, admired from afar as a U.K. innovation, is now a structurally viable, commercially available, and strategically differentiated tool for American plan sponsors. In the current environment of record funding levels and competitive insurer pricing, the buy-in occupies a uniquely attractive position: It offers the full economic risk transfer of a traditional annuity transaction without requiring plan termination, and it can serve not only as a stepping stone to eventual wind-up, but as a permanent, standalone funded-status hedge for sponsors committed to maintaining their plans over the long term.

For pension professionals advising plan sponsors, the buy-in deserves prominent placement in the de-risking toolkit, not as a fallback or a second-best option, but as a first-order strategic choice. The window created by today's favorable funding environment may not remain open indefinitely. Sponsors who act with discipline and foresight now will be best positioned to protect the gains that have taken years to accumulate.