Accounting for Pension Buy-In Arrangements
The first pension "buy-in" contract was recently purchased by a U.S. pension plan. This buy-in arrangement is similar to a traditional non-participating annuity (a "buy-out"), where a plan transfers future responsibility for promised employee retirement benefits to an insurance company.
Under the buy-in arrangement, however, the benefit obligation is not transferred to the insurer. Instead, the plan remains responsible for paying the benefits, but purchases a contract from the insurer which generates returns designed to equal all future benefits payments to covered participants.
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