U.S. Labor Department report: How pensions are being replaced by annuities

U.S. Labor Department report: How pensions are being replaced by annuities

March 23, 2024

How pensions are being replaced by annuities is discussed in a recent article posted in Morningstar and MarketWatch. According to the article "U.S. Labor Department pension report may run counter to life insurance industry practices. Washington should be helping businesses transfer their retiree pension payments to the more financially secure, better-regulated life insurance industry."

Most people don't realize that a 'pension' is an annuity just like social security is really an annuity. The article discusses the resilience of the insurance industry over two centuries in the U.S.

"The life insurance industry in the U.S. dates back 265 years, persevering through wars, recessions, and depressions. Retirement-income annuities are a form of insurance. Providing financial protection is what the life insurance industry does. Life insurance companies are built from the ground up to manage and pay monthly income for life- and other benefits, which are enormously challenging tasks. They do it better than any employer can hope to do."

How strong are life insurance companies? What track record do they have in making annuity payments?

"Life insurance companies are also more financially secure than most employers. State-based life insurance regulations and annuity-holder protections are the strongest in the financial-services industry. In fact, since 1995 when the Labor Department last addressed the employer pension annuity-transfer practice, no retiree has failed to receive a promised annuity payment. By comparison, in that same period, more than 2,600 private employer pension plans have failed. The U.S. life insurance system clearly has a better track record."