Behind the Scenes of a Successful Pension Risk Transfer

Written by Chris Dvorak, Practice Executive, Asset Owners Americas at Northern Trust and Paula Cole, Vice President and Leader of Pension Risk Transfer at Nationwide.

Pension risk transfers (PRTs) are complex transactions that require coordination across multiple stakeholders, including insurers, recordkeepers, and custodians. As more plan sponsors pursue PRTs to manage long-term liabilities, the operational demands have grown in both scale and sophistication.

Over the past decade, the PRT market has evolved significantly, driven by rising interest rates, regulatory clarity, and growing insurer capacity. What was once a niche strategy has become a mainstream de-risking tool, offering plan sponsors a way to reduce volatility, improve balance sheet health, and refocus on core business priorities. As the industry continues to mature, the need for tight operational alignment across all parties has never been more critical.

We spoke with Chris Dvorak, Practice Executive, Asset Owners Americas at Northern Trust and Paula Cole, Vice President and Leader of Pension Risk Transfer at Nationwide to explore the critical roles each firm plays in executing successful PRTs, the importance of connectivity across functions, and how collaborative servicing models are evolving to meet the needs of today’s institutional clients.

How has the PRT market evolved in recent years?

Chris Dvorak: PRTs have been a part of the defined benefit landscape for many years, but really gained traction in 2012, steadily maturing since then. In 2024 alone, activity reached nearly $52 billion in premiums, according to LIMRA’s U.S. Group Annuity Risk Transfer Sales Survey. This volume reflects the continuing appetite for PRTs among plan sponsors as organizations prioritize financial resilience and long-term risk management. 

Paula Cole: As Chris mentioned, growth in the PRT market is evidence of a continued focus on pension de-risking, especially as market volatility and regulatory complexity continue to impact plan sponsors’ financial statements. While the first half of 2025 saw a slowdown in activity due to market volatility and legislative and legal uncertainty, we expect interest in PRT to remain strong. For plan sponsors considering PRT, the evolving market offers more options, competitive pricing and greater insurer expertise in managing investment and longevity risk.

What are the top strategic reasons a plan sponsor might consider a PRT today? What options does a plan sponsor have as they derisk their plan before they might consider a full annuitization transaction with an insurer?

Cole: PRTs offer plan sponsors a way to help reduce long-term financial liabilities by transferring defined benefit (DB) plan obligations to a third-party insurance company. This approach not only helps remove the burden of future pension payments but also eliminates recurring costs associated with administering DB plans, including actuarial services, recordkeeping, compliance and funding requirements.

Additionally, DB plans require annual premiums to the Pension Benefit Guaranty Corporation (PBGC), and as plans become frozen or closed to new participants, the justification for maintaining these expenses diminishes. By implementing a PRT strategy, sponsors can streamline operations, reduce financial risk and focus resources on current employees and core business priorities all while safeguarding the promised benefits for the DB plan participants.

We’ve also seen some plan sponsors pivoting from traditional buy-outs to buy-ins in today’s market environment. In a buy-out, plan sponsors transfer all or a portion of a pension plan, including assets and liabilities, to an insurer who issues an annuity contract directly to participants and pays benefits, removing liabilities from a company’s balance sheet. In a buy-in, plan sponsors purchase an annuity contract from an insurer that is held by the pension plan as an asset while liabilities remain on the plan sponsor’s balance sheet. Buy-ins are an option that offer plan sponsors with well-matched assets and liabilities the ability to lock in current pricing, making them an attractive choice.

Can you tell us a bit about your approach to your pension risk transfer business?

Dvorak: In 2017, we leveraged our history, expertise, and scale to enter the PRT market and bring our solution to the insurance marketplace – at which point there was a void in terms of scale and choice of service providers.

Over the past eight years, we’ve established meaningful relationships with insurers like Nationwide who are extremely active in the PRT space. We view ourselves as an extension of their business while providing custody, cash management and benefit payment services to support their operating model – and performing these critical services allows them to focus on plan transitions, as well as investment and risk management. Being that essential partner for them and having the synergies of our people, our processes, and our data provides the efficiencies they need to continue to grow their business lines.

Cole: Great companies look for ways to continuously improve and add more value for customers – and Nationwide proudly holds itself to this high standard. For more than 60 years, we’ve assumed liabilities from pension plans. We marry our decades of enterprise experience in annuities with leaders who are highly experienced in PRT, allowing us to build on our previous knowledge of the industry and evolve to meet the current needs of our customers. Nationwide’s proven track record with managing risk, strong and stable financial position, diversified product portfolio and deep experience working with corporate customers, plan sponsors and their participants continue to position us as a leader in the PRT space. We are committed to delivering long-term financial security and exceptional service to plan sponsors and their retirees.

What makes for a strong custodian-client relationship during times of change like a PRT?

Dvorak: A strong custodian-client relationship during a PRT is built on trust, responsiveness, and proactive support. Custodians that bring a long-term perspective and a team of experienced professionals can help clients navigate the complexities of pension transitions with confidence.

Key to this relationship is a well-defined and proven transition plan, tailored to the specific needs of each client. Transparency, anticipation of challenges, and agility throughout the process help ensure that clients feel supported and that the transaction proceeds smoothly.

Pension risk transfers require close coordination between the insurer, recordkeeper, and custodian. From your perspective, why is that connectivity so critical to the success of a transaction?

Dvorak: From Northern Trust’s perspective, connectivity between the insurer, recordkeeper, and custodian is essential to ensuring a smooth and accurate execution of PRTs. Each party plays a distinct role, but the success of the transaction depends on tight integration of data, timing, and communication.

As the custodian, Northern Trust helps facilitate precise cash movement, timely benefit payments, and reliable data exchange. We work closely with insurers and recordkeepers to align operational workflows and help mitigate risk. This connectivity not only supports the technical execution of the transaction, but it also reinforces confidence for plan sponsors and participants during the transition.

Cole: One of Nationwide’s key decisions to enhance how we deliver business is working with a third-party administrator to maintain records, engage and service annuitants. While most of our competitors are leveraging legacy administration platforms, Nationwide has partnered with a market-leading recordkeeper in defined benefit plan administration. This relationship has given us access to a modern platform with a full suite of digital tools, including unlimited online benefits estimates, expansive self-service capabilities, and the ability to initiate retirement benefits online.

We also tapped Northern Trust to serve as our custodian, allowing them to make direct payments to retirees and beneficiaries. With their long-standing reputation and expertise in trust services, this relationship ensures payments are processed accurately, efficiently and on time. We value Northern Trust’s reliability and professionalism, which align with our commitment to operational excellence. We continue to work with both partners to align on the processes and experiences that best meet the needs of our customers across the value chain. 

Looking Ahead: Evolving Roles in a Growing PRT Ecosystem

As PRTs continue to gain traction among plan sponsors, the importance of operational alignment across insurers, recordkeepers, and custodians has never been greater. Each provider contributes distinct expertise to support the execution of these complex transactions. From managing liabilities and servicing annuitants to ensuring accurate benefit payments and data exchange, the success of a PRT hinges on collaboration, precision, and adaptability. As the market evolves, so too will the servicing models and technologies that underpin it—making coordination across stakeholders not just beneficial, but essential.

About Northern Trust  

Founded in 1889, Northern Trust has provided trust and custody services for more than 135 years. Our Benefit Payment Services group has offered exceptional client service and a flexible system since 1965. Our expertise is evident in the volumes we handle; we issue more than 2.25 million periodic and 100,000 lump sum distributions each month and produce more than 3 million tax forms each year.  A flexible servicing model allows Northern Trust to work seamlessly with any insurer or their designated recordkeeper, ensuring accurate and timely execution across the value chain.

About Nationwide  

Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified financial services and insurance organizations in the United States. Nationwide is rated A+ by Standard & Poor’s. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; excess & surplus, specialty and surety; and pet, motorcycle and boat insurance.

For more information about Nationwide and Nationwide’s ratings, visit  www.nationwide.com or Company Ratings -- Nationwide.

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