Mercer has a launched a new exchange to help plan sponsors execute group annuity buyouts with simplicity.

The Mercer Pension Risk Exchange enables plan sponsors to continuously monitor pricing and contract terms available in the group annuity market and is only available to Mercer clients. It also aims to serve as a marketplace, where numerous companies compete.

It takes plan sponsors “inordinate” lengths of time to enact buyouts under the current system, says Malcolm Hodge, senior partner in Mercer’s retirement business, in Boston. “In order to effectively transact, it is [our] opinion that you need access to carriers,” he says. “You need to get pricing that you can understand and that is transparent.”

“The current process does not allow for that,” he adds. “[The exchange] brings carriers and plan sponsors together on our online platform and they can share data, provide pricing, and it is Mercer’s job to bring the carrier and sponsor together in such a way that they can create a market.”

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The exchange may be a good fit for plans that have a lot of people with vested deferred benefits and want to de-risk, says Judy Miller, director of retirement policy at the American Retirement Association, in Arlington, Va. “If someone is contemplating doing that, it is a lot easier for someone to see what it will cost on the marketplace instead of having to … get quotes,” she explains. “It would be easier to have a good sense of what the market price is and how much it will cost to risk.” That, Miller says, can determine if it is a good idea for the plan sponsor.

When a plan sponsor makes a fiduciary decision to buy annuities they must go to several carriers. But doing so is like “herding cats,” Hodge says, as the carriers — there are seven or eight of them — have their  own specifications for how they want to see the data, how they want to see the terms of the plan and different timetables for giving quotes on certain days of the month. “It is, frankly, very difficult to get prices to compare apples to apples,” he says.

“What the exchanges does is streamlines the whole thing,” he says. “Here is a set data that all carriers have agreed to. Here is a set way to lay out all terms of the plan and in terms of timeframe; we will require pricing to be organized under a certain time on a certain day so it is apples to apples.”

Will carriers participate?

Key to a having a market is having both parties involved, Hodges says. “That is Mercer’s job. We will bring the plan sponsors to the table but also we bring the carrier to the table.”

Carriers would want to come to the table because currently they lack visibility into their future business pipeline, he says. “Because their market is made up of … defined pension plans that may or may not want to buy an annuity, a carrier has [limited] visibility into what their market of customers will need in the next 12 months,” he explains. “They have a very tough time judging the demand in that market.”

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By working on the Mercer marketplace, plan sponsors are expressing an interest in transacting, and as a result, carriers will be “very interested to see what the demand is,” Hodge says. “So carriers will sign up to participate in the exchange and provide pricing. It gives them great insight into the demand side of the market.”


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